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Figure: Budget Constraint 4
-(Figure: Budget Constraint 4) Refer to the figure. This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. The slope of the budget constraint is equal to:
A) the price of sneakers divided by the price of flip-flops.
B) the price of flip-flops divided by the price of sneakers.
C) the consumer's income.
D) the quantity of flip-flops divided by the quantity of sneakers.

Question

Use the following to answer questions:
Figure: Budget Constraint 4 
-(Figure: Budget Constraint 4) Refer to the figure. This figure represents the budget constraint of a consumer who purchases flip-flops and sneakers. The slope of the budget constraint is equal to:
A) the price of sneakers divided by the price of flip-flops. 
B) the price of flip-flops divided by the price of sneakers. 
C) the consumer's income. 
D) the quantity of flip-flops divided by the quantity of sneakers.

Quizplus · Accepted Answer

The slope of the budget constraint is equal to the price of flip-flops divided by the price of sneakers. Therefore, the best choice would be to choose a combination of flip-flops and sneakers that lies on the budget constraint and has the highest marginal utility per dollar spent. This point is at the tangency point between the budget constraint and the highest possible indifference curve.

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