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Which of the following is true regarding a household's budget line? It reflects the reality of...

Which of the following is true regarding a household's budget line?

It reflects the reality of a limited ability to consume.

It reflects the preferences of the household.

Its slope changes when income changes.

Its slope is the ratio of income to the price of the good.

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Answer #1

The household's budget line reflects the reality of a limited ability to consume. It also reflects the preference of the household. The household 's consumption choices are constrained by price and income of goods and services. The slope of budget line reflect the rate at which one product can be substituted for another good. The slope is the ratio of price of two goods. With change in income the budget line will shift left or right but the slope of line remain same.

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