The Budget Constraint Shows That

question 280

Multiple Choice

The budget constraint shows that

• A) the consumer faces a trade-off in the consumption of goods.
• B) the consumer can have as many goods as he wants.
• C) as consumers spend more on one good, they spend more on others.
• D) total income equals total spending on one good.

---

Definitions:

Market Economy

An economic system where supply and demand from consumers drive the production of goods and services, with minimal government intervention.

Supply And Demand

Basic economic concept that describes the balance between the availability of a product or service and the desire (demand) for it.

Free Enterprise System

An economic system where private businesses operate in competition, largely free of state control, with limited government intervention.

Market System

An economic system in which decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand.