The slope of the budget line is: negative, since to purchase more of one good means giving up some of the other good. positive, since income and prices are positively related. zero, since both prices and income are assumed to be constant. negative, because of the marginal rate of substitution.

Question

Natalee

Business

1 November, 07:44

The slope of the budget line is: negative, since to purchase more of one good means giving up some of the other good. positive, since income and prices are positively related. zero, since both prices and income are assumed to be constant. negative, because of the marginal rate of substitution.

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Brett Casey · Answer 1

negative, since to purchase more of one good means giving up some of the other good

Explanation:

Budget Line shows combination of two goods that a consumer can consume, given prices & income.

Equation : p1x1 + p2x2 = m;

It is a downward sloping line, because given same money income & prices - if consumer has to increase consumption of one good, he / she can consume lesser of the other good. So, there is negative relationship between two goods & hence the budget line is downward sloping.