Which of the following statements best describes a consumer's budget line?
A) It shows all combinations of goods among which the consumer is indifferent.
B) It shows the limits to a consumer's set of affordable consumption choices.
C) It shows the desired level of consumption for the consumer.
D) It shows the consumption choices made by a consumer.

Question

Quizplus · Accepted Answer

A budget line shows the different combinations of goods that a consumer can afford given their income and the prices of goods. It represents the boundary between what is affordable and what is not affordable for the consumer. Therefore, Option B is the correct answer. Option A is incorrect because it describes the concept of an indifference curve, which shows combinations of goods that give a consumer the same level of satisfaction. Option C and D are also incorrect because a budget line does not represent a consumer's desired level of consumption or their actual consumption choices.

Which of the Following Statements Best Describes a Consumer's Budget