A budget constraint represents the ________.
A) total money income that an agent earns in different time periods
B) goods and services an economic agent can choose given her limited income
C) inequality in the incomes earned by various economic agents
D) aggregate income earned by all firms in an economy

Question

Quizplus · Accepted Answer

A budget constraint represents the combination of goods and services an economic agent can purchase given their limited income or budget. It is determined by the prices of goods and services and the amount of money an agent has available to spend. A is incorrect because a budget constraint only represents the money income available in a given period, not total money income earned over multiple periods. C and D are incorrect because they do not relate to the concept of a budget constraint.

A Budget Constraint Represents the ________