A budget constraint:

a. shows the combinations of consumption bundles that give the consumer the same utility.

b. indicates the limited amount of income available to consumers to spend on goods and services.

c. shows the rate at which a consumer would be willing to trade off one good for another.

d. shows the change in total utility a consumer receives from consuming one additional unit of a good or service.

e. indicates the marginal rate of substitution.

Question

Business

Clara Ball

28 May, 00:05

A budget constraint:

a. shows the combinations of consumption bundles that give the consumer the same utility.

b. indicates the limited amount of income available to consumers to spend on goods and services.

c. shows the rate at which a consumer would be willing to trade off one good for another.

d. shows the change in total utility a consumer receives from consuming one additional unit of a good or service.

e. indicates the marginal rate of substitution.

+5

Answers (1)

Know the Answer?

Romeo Sims · Answer 1

A budget constraint shows the rate at which a consumer would be willing to trade off one good for another. It represents various combinations of goods consumer can afford, given income and prices of the two goods. Example:

if the consumer buys no shirts, he can afford 50 shoes. If he buys no shoes, he can afford 100 shirts.