alleryThe slope of the budget line is determined by the:
Aratio of the prices of the two goods
Bratio of the marginal utilities
Ctotal money income of the consumer
Dlevel of satisfaction desired
Answer & Solution
Correct answer: A. ratio of the prices of the two goods
1. The budget line shows combinations buyable with a given income at given prices.
2. Its slope equals the price ratio $P_x / P_y$, the rate at which one good can be traded for the other.
3. MU ratio gives the IC slope, while income and satisfaction shift or label curves but do not set the budget-line slope, so those options are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.19_
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