A budget line
A) shows the limits to what can be consumed.
B) has a slope equal to a relative price.
C) rotates or shifts only when the consumer's budget changes.
D) Answers B and C are both correct.
E) Answers A and B are both correct.

Question

Quizplus · Accepted Answer

The budget line shows the combination of goods and services that can be purchased with a given budget, thus indicating the limits to what can be consumed. The slope of the budget line is equal to the relative price of the two goods represented on the axes. Finally, the budget line rotates or shifts only when the consumer's budget changes. Therefore, both A and B are correct, leading to the correct answer of E.

A Budget Line