A budget constraint is a straight line because ________.
A) the tastes and preferences of a consumer change along the constraint
B) a consumer faces a fixed price for both goods that does not change with changes in consumption
C) the opportunity cost of buying each of the goods changes along the constraint
D) a consumer has a limited money income

Question

Quizplus · Accepted Answer

A budget constraint is a straight line because it represents combinations of two goods that a consumer can purchase given their income and the fixed prices of those goods. The slope of the line reflects the constant trade-off between the goods, which is determined by their relative prices. Since these prices do not change with consumption levels within the context of the budget constraint, the line remains straight.

A Budget Constraint Is a Straight Line Because ________