If a consumer is initially endowed with a positive amount of two goods and sells some of one to get more of the other and if she has no other sources of income, then her budget line will pass through her endowment point.

Question

Quizplus · Accepted Answer

This is true because the endowment point represents the initial combination of goods that the consumer possesses, and if she sells some of one good to get more of the other, the total value of her bundle remains the same. Therefore, her budget line must pass through the endowment point, which is the starting point of her choice set.

If a Consumer Is Initially Endowed with a Positive Amount