Question

The slope of a budget line indicates ______.

Options

• The ratio of total expenditure to income

• The price of one good compared to another

• The consumer’s preferences

• The total goods bought

Answer 1

The slope of a budget line indicates the price of one good compared to another.

Explanation:

The slope equals the negative ratio of the price of food to the price of clothing, showing how many units of one good must be given up to buy more of the other.