The budget constraint shows the
A) combinations of goods that generate the same amount of total satisfaction.
B) possible combinations of goods that can be purchased with a specified income.
C) changes in consumption of goods that a consumer makes when his income increases.
D) amount of a good the consumer will buy at various prices.

Question

Quizplus · Accepted Answer

The budget constraint shows the possible combinations of goods that can be purchased with a specified income. It sets the limit on the maximum amount a consumer can spend on two goods given their prices and their income. The consumer needs to make choices based on the trade-offs between the goods within this constraint.

The Budget Constraint Shows the