Consider two goods: pizza and cola.What is the slope of the consumer's budget constraint measured by
A)the consumer's income divided by the price of cola
B)the relative price of pizza and cola
C)the relative income that the consumer spends on pizza and cola
D)the consumer's spending on pizza divided by the consumer's income

Question

Quizplus · Accepted Answer

The slope of the budget constraint is equal to the relative price of pizza and cola, which is the ratio of the price of pizza to the price of cola. This is because the slope measures the rate at which the quantity of one good that can be purchased decreases as the quantity of the other good increases, and this is determined by their relative prices.

Consider Two Goods: Pizza and Cola