The slope of a budget line for a consumer buying two goods is equal to the _______ of the price of the good on the ________ axis divided by the price of the good on the _______ axis.
A) positive; vertical; horizontal
B) negative; horizontal; vertical
C) positive; horizontal; vertical
D) negative; vertical; horizontal

Question

Quizplus · Accepted Answer

The slope of a budget line represents the rate at which a consumer can trade one good for another, which is determined by the relative prices of the two goods. It is calculated as the negative of the price of the good on the horizontal axis divided by the price of the good on the vertical axis, reflecting the trade-off between the two goods. This is because as a consumer increases consumption of one good, they must give up some of the other good, assuming a fixed budget, which results in a downward sloping budget line.

The Slope of a Budget Line for a Consumer Buying