Consumers' preferences are represented by
A) budget lines.
B) indifference curves.
C) relative prices.
D) household income.

Question

Quizplus · Accepted Answer

Indifference curves represent consumers' preferences by showing all the combinations of two goods that give the consumer the same level of satisfaction or utility. Budget lines (A) show the combinations of two goods that can be purchased given a consumer's income and the relative prices of the goods. Relative prices (C) are the ratios of the prices of two goods and do not directly represent consumer preferences. Household income (D) is a factor that affects the consumer's ability to purchase goods and services, but it does not represent his or her preferences.

Consumers' Preferences Are Represented by