A consumer's budget constraint changes slope whenever:
A) the consumer buys a different combination of goods.
B) relative prices change.
C) the consumer's income increases.
D) an indifference curve is tangent to it.
E) absolute prices change.

Question

Quizplus · Accepted Answer

A consumer's budget constraint shows the different combinations of goods and services that the consumer can purchase given their income and the prices of those goods and services. The slope of the budget constraint is determined by the relative prices of the two goods. Therefore, whenever the relative prices change, the slope of the budget constraint will also change.

A Consumer's Budget Constraint Changes Slope Whenever