Which of the following statements is correct?
A) The slope of the budget line shows the opportunity cost of the good measured along the x-axis.
B) Along the budget line, consuming more of one good implies consuming more of the other.
C) The slope of the budget line shows there is no tradeoff between the two goods because the consumer can buy each of them.
D) If the consumer's budget increases, the budget line shifts leftward and its slope does not change.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The slope of the budget line represents the opportunity cost of consuming one good in terms of the quantity of the other good that must be foregone.

Answer: B 
 The budget line illustrates the different combinations of two goods that a consumer can purchase given their budget constraint, and thus reflects the trade-off between consuming the two goods.

Answer: E 
 None of the statements are completely correct. Statement C is particularly incorrect, as the slope of the budget line indicates the trade-off between the two goods. Statement D is also incorrect, as an increase in budget would cause the budget line to shift outward, not inward.

Which of the Following Statements Is Correct