In a consumer's budget constraint, the absolute value of the slope of the budget line represents the:
Correct answer: B. Ratio of the prices of the two goods
- A. Ratio of the consumer's income to wealth
- B. Ratio of the prices of the two goods
- C. Difference between the prices of the two goods
- D. Sum of the quantities of the two goods
Explanation
The budget line shows combinations that exhaust income, and its slope is determined by the relative prices of the two goods. Income changes shift the line, but do not determine its slope when prices remain fixed.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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