Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 1 - Limits, Alternatives, and Choices - Discussion Questions: 6

Answer

The slope of the budget line is negative, and this indicates that when the consumers are making a decision relating consumption, they ought to make tradeoffs. The opportunity cost of an additional amount of a particular commodity is measured by the slope of the budget line. The limited incomes influence the decisions that consumers make when decisions to buy services and commodities. The points the on the inner side of the budget line or on the budget line are attained using the existing incomes. However, those that lie on the outer side on the budget line cannot be attuned because the income is limited.

Work Step by Step

The budget line depicts the consumer’s power to purchase goods and services. It provides the combination of two commodities that can be purchased by a consumer by using a particular amount of income. The income of the consumer influences his or her position on the budget line.
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