Fiona uses all of her income to purchase popcorn and butter. At any two points A and B on Fiona's budget constraint,
A)Fiona is equally happy.
B)Fiona is spending more money on popcorn than she is spending on butter.
C)Fiona's income is different.
D)the price of popcorn relative to the price of butter is the same.

Question

Quizplus · Accepted Answer

The budget constraint shows the different combinations of popcorn and butter that Fiona can purchase with her income. The slope of the budget constraint is determined by the relative prices of popcorn and butter. At any two points on the budget constraint, the slope (i.e. the relative prices) is the same. Therefore, the correct choice is D - the price of popcorn relative to the price of butter is the same. The other options are incorrect because Fiona's happiness depends on her preferences, not just the amount spent on different goods, and her income does not necessarily have to be different at two points on the budget constraint.

Fiona Uses All of Her Income to Purchase Popcorn and Butter