Budget constraint is the
A) set of consumption bundles that represents the amount the consumer cannot afford.
B) set of consumption bundles that represents the minimum amount the consumer can afford.
C) set of consumption bundles that represents the maximum amount the consumer can afford.
D) set of consumption bundles facing a consumer with an unlimited budget and no opportunity costs.
E) price at which an economic "good" becomes an economic "bad."

Question

Quizplus · Accepted Answer

The budget constraint is a set of consumption bundles that represents the maximum amount the consumer can afford. It reflects the trade-off between goods that a consumer can purchase with their limited income and the prices of those goods. It is represented by the equation: P1Q1 + P2Q2 = M, where P1 and P2 are the prices of two goods, Q1 and Q2 are the quantities purchased, and M is the consumer's income. The budget constraint essentially sets the boundary for the consumer's feasible consumption choices.

Budget Constraint Is the