Asked by RAM SAI DINESH REDDY on Jul 30, 2024
Verified
There are two goods.You know how much of good 1 a consumer can afford if she spends all of her income on good 1.If you knew the ratio of the prices of the two goods, then you could draw the consumer's budget line without any more information.
Consumer's Budget Line
A graphical representation that shows all possible combinations of two goods that a consumer can purchase with a fixed budget.
Price Ratio
The relative price of one good or service compared to another, typically used in the analysis of consumer choice and budget allocation.
Good 1
Generally represents the first good or service in an economic model, used to analyze consumer behavior or market dynamics.
- Learn how fluctuations in the cost of products and changes in earnings influence the budget line's representation on a graphical chart.
- Acknowledge the association between the gradient of the budget curve and the costs of products.
Verified Answer
JG
Jackie GibbsJul 31, 2024
Final Answer :
True
Explanation :
The ratio of the prices of the two goods allows us to determine the slope of the budget line, which in turn determines how much of each good can be purchased at different levels of income. Therefore, knowing the ratio of prices is sufficient to draw the budget line.
Learning Objectives
- Learn how fluctuations in the cost of products and changes in earnings influence the budget line's representation on a graphical chart.
- Acknowledge the association between the gradient of the budget curve and the costs of products.