Assume that a consumer spends a given budget on only two goods, and that the prices of the two goods are constant. The budget line in this case would:
A) Definitely be a straight downward-sloping line
B) Possibly be a straight upward-sloping line
C) Be a curved graph bowed outwards
D) Be a curved bell-shaped graph

Question

Quizplus · Accepted Answer

The budget line in this case represents all the possible combinations of the two goods that a consumer can buy with a fixed budget. Since the prices of the two goods are constant, the budget line will be a straight line with a negative slope, as the consumer can only buy more of one good by giving up some of the other. Therefore, the correct answer is A, which says that the budget line will definitely be a straight downward-sloping line.

Assume That a Consumer Spends a Given Budget on Only