A budget constraint:
A) shows a constant dollar amount spent on different combinations of goods, and each bundle brings the same utility.
B) shows a constant dollar amount spent on different combinations of goods, and each bundle brings a different amount of utility.
C) shows a constant amount of utility gained by consuming different combinations of goods, and each bundle costs the same.
D) None of these is true.

Question

Quizplus · Accepted Answer

A budget constraint shows different combinations of goods that can be purchased with a fixed amount of income. Option A is incorrect because different combinations of goods will have different levels of utility, meaning they do not bring the same utility. Option C is incorrect because different combinations of goods will have different costs, meaning they do not cost the same. Option D is incorrect because option B is true.

A Budget Constraint