Question

Q15). True or False

• 1. If we measure the quantity of French fries on the horizontal axis and the quantity of hamburgers on the vertical axis, and if the price of French fries is $0.60 and the price of a hamburger is $2.40, then the slope of the budget constraint is 1/4 (and it is negative).

• 2. A budget constraint is a set of commodity bundles that provide the consumer with the same level of satisfaction

• 3. Indifference curves measure the consumer's willingness to trade one good for another good while maintaining a constant level of satisfaction

4. When drawn on a graph that measures the quantity of a good on each axis, indifference curves are usually straight lines that slope downward (negatively).

• 5. Indifference curves tend to be bowed inward because a consumer is willing to trade a greater amount of a good for another if they have an abundance of the good they are trading away

Answer 1

1) True, because the slope of budget line is defined as the ratio of price of good on horizontal axis to the price of good on vertical axis.

2) False, budget constraint is is a set of commodity bundles which consumer can consume at same level of income.

3) True, Because indifference curves measures the consumer's willingness to trade one good for another good while maintaining a constant level of satisfaction.

4) False, Because indifference curves can be convex and concave to the origin.

5) True, Because in that case indifference curve would be bowed inwards.