The budget set defines the combinations of good X and Y that:
A) are desirable to the consumer.
B) are affordable to the consumer.
C) maximize the consumer's utility.
D) maximize the supplier's profit.

Question

Quizplus · Accepted Answer

The budget set includes all the combinations of goods X and Y that the consumer can afford given their income and the prices of the goods. Thus, the consumer must choose from within this set, and the best choice will be the one that maximizes their utility (subject to the budget constraint). However, the budget set itself does not necessarily represent desirable or optimal choices - these will depend on the consumer's preferences and utility function. Similarly, the budget set does not have any direct relevance to the supplier's profit-maximizing decisions.

The Budget Set Defines the Combinations of Good X and Y