Question

In the following diagram of budget line, point “D” represents:

Options

• Bundle which cost equal to money income of consumer

• Bundle which cost less than money income of consumer

• Bundle which cost greater than money income of consumer

• None of these

Answer 1

Bundle which cost less than money income of consumer

Explanation:

Point D lies inside, or below, the budget line, so the bundle costs less than the consumer’s income. Bundles on the line use all income, while bundles outside it are unaffordable.