Asked by Araceli ArredondoLona on Jul 03, 2024
Verified
A consumer's budget constraint for goods X and Y is determined by how much the consumer likes good X relative to good Y.
Budget Constraint
The limit on the consumption bundles that a consumer can afford to purchase based on their income and the prices of goods and services.
Goods X
A placeholder term typically used in economic models to represent a generic good or product.
- Gain an understanding of the theory and graphical illustration of budget constraints and their alteration due to shifts in income.
Verified Answer
KR
krista roblesJul 07, 2024
Final Answer :
False
Explanation :
A consumer's budget constraint is determined by the prices of goods X and Y and the consumer's income, not by their preferences for one good over another. Preferences influence how the budget is allocated, but the constraint itself is based on financial factors.
Learning Objectives
- Gain an understanding of the theory and graphical illustration of budget constraints and their alteration due to shifts in income.