Budget Constraints Quiz

What do a budget constraints represent in economics?

• Unlimited consumption choices

• Income limitations for purchasing goods and services

• Consumer preferences for certain goods

• Dependence of goods' prices on demand

If consumers's income increases, how does the budget constraint change?

• The budget constraint shifts inward

• The budget constraint rotates outward

• The budget constraint shifts outward

• The budget constraint becomes vertical

If the price of one good decreases while the other remains constant, the slope of the budget constraint changes.

• True

• False

What happens to the budget constraint if the price of one good increases while the consumer's income and the price of the other good remain constant?

• The budget constraint shifts outward

• The budget constraint rotates inward

• The budget constraint shifts inward

• The budget constraint becomes horizontal

What happens to the budget constraint if the price of one good decreases, while income and the price of the other good remain constant?

• The budget constraint shifts inward

• The budget constraint rotates outward

• The budget constraint remains unchanged

• The budget constraint becomes vertical