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How does the slope of a budget line illustrate opportunity cost and trade-offs? How does a...

How does the slope of a budget line illustrate opportunity cost and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes
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Answer: Budget lines are always sloped downward. This downward slope shows an inverse relationship between the two goods, meaning that as you increase one, the other must decrease. This decrease is what you are giving up, or opportunity cost, of the good you are getting more of.


Budget lines illustrate scarcity in that they show you are limited by your income. Since they slope downward, they show you cannot keep getting more and more of both goods. There is always a trade-off. The area beyond the budget line represents combinations of the goods that are beyond your income.

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