In Order to Determine a Household's Budget Line, You Must

question 14

Multiple Choice

In order to determine a household's budget line, you must know the

• A) prices of the goods bought, but not the household's income.
• B) prices of the goods bought and the household's income.
• C) household's income, but not the prices of goods bought.
• D) household's income, the prices of the goods bought, and the household's preferences.

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Definitions:

Inferior Good

A type of good for which demand decreases when the income of the consumer increases, inversely related to consumer income.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, in contrast to a normal good.

Inferior Goods

A good that has a negative income elasticity, so that as consumer income rises, the demand for the good falls.

Normal Goods

Goods for which demand increases as the income of individuals increases.