Economics 202 Module 3.1

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to:

pivot leftward (pivot in) along the vertical axis

If quantity of milk is measured on the horizontal axis and quantity of juice is measured on the vertical axis, a decrease in the price of milk will cause the budget constraint to

pivot rightward (pivot out) along the horizontal axis.

A decrease in the price of either one or the other good will cause a consumer's budget constraint to

pivot rightward (pivot out).

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint

pivots leftward (pivot in) without a change in the intercept on the horizontal axis.

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases:

the opportunity cost of buying sweaters increases.

The slope of a budget constraint represents:

the opportunity cost of one good in terms of another

budget set

the set of all possible bundles of goods and services that can be purchased with a consumer's income

A change in the slope of a budget constraint indicates:

a change in the price of either good that causes a change in the opportunity cost.

A budget constraint is a straight line because

a consumer faces a fixed price of both goods that do not change with changes in consumption. the tastes and preferences of the consumer change along the constraint.

If a consumer purchases any combination of goods and services on his ________, he will exhaust his income completely

budget constraint

The restriction that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

the budget constraint.

budget constraint

the goods and activities that consumers can choose that exactly exhaust their entire budget