Question

Which of the following statements is correct?

A) Consumers have the ability to buy everything they desire.
B) A consumer's budget line shows the limits to what a consumer can buy.
C) A consumer's budget line shows the goods with the highest marginal utilities.
D) Rich consumers are unaffected by prices.
E) A budget line changes only if the person's budget changes.

Answer 1

Answer:

Correct option is B.

A budget line shows the limits to what a consumer can buy

Explanation:

In economics, a budget line represents all the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Consumer theory uses the concepts of a budget constraint and a preference map to analyse consumer choices.