The magnitude of the slope of the budget line is the
A)relative price of the good measured on the vertical axis.
B)relative price of the good measured on the horizontal axis.
C)absolute price of the good measured on the horizontal axis.
D)real price of the good measured on the vertical axis.
E)price of the good measured on the vertical axis.

Question

Quizplus · Accepted Answer

The slope of the budget line shows the rate at which one good can be exchanged for another. Specifically, it shows the amount of the good on the vertical axis that must be given up to acquire one unit of the good on the horizontal axis. Therefore, the magnitude of the slope represents the relative price of the good on the horizontal axis, which is the best answer choice. The other answer choices are either incorrect or not as precise as choice B.

The Magnitude of the Slope of the Budget Line Is