Evaluate the truthfulness of the following statements.
I. The budget constraint is a function of consumer preferences.
II) The budget constraint defines the set of baskets that a consumer can purchase with a specific level of income.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Question

Evaluate the truthfulness of the following statements. 
I. The budget constraint is a function of consumer preferences.
II) The budget constraint defines the set of baskets that a consumer can purchase with a specific level of income.
A) Both I and II are true.
B) Both I and II are false.
C) I is true; II is false.
D) I is false; II is true.

Quizplus · Accepted Answer

The budget constraint is determined by the consumer's income and prices of goods, not preferences. It defines the set of baskets a consumer can afford, making statement II true.

Evaluate the Truthfulness of the Following Statements