A budget constraint:
A) shows different bundles of goods that all yield the same total utility.
B) shows different bundles of goods that all cost the same amount.
C) shows different bundles of goods that all maximize an individual's utility.
D) shows how much income is needed to maximize total utility.

Question

Quizplus · Accepted Answer

A budget constraint shows the different combinations of goods that can be purchased with a given amount of income or budget. These combinations or bundles of goods all cost the same amount or fall within the budgetary constraints. Therefore, option B is the correct choice. Option A is referring to an indifference curve, which shows different combinations of goods that give the same level of utility, and option C is related to utility maximization where consumers choose bundles that offer the highest total utility. Option D is also not correct as a budget constraint does not state how much income is needed to maximize utility.

A Budget Constraint