What is the difference between a budget line and an indifference curve?
A) One is measured in dollars while the other in units of goods.
B) One shows what is possible while the other shows what is preferred.
C) One shows a positive relationship, and the other shows a negative relationship.
D) The budget line is bowed in toward the origin, and the indifference curves are linear.
E) There is no difference.

Question

Quizplus · Accepted Answer

A budget line represents the combinations of two goods that can be purchased with a given income and prices, while an indifference curve shows the various combinations of two goods that provide the same level of utility or satisfaction to a consumer. So, the budget line indicates what is possible, while the indifference curve indicates what is preferred or chosen by the consumer.

What Is the Difference Between a Budget Line and an Indifference