Question

How does the slope of a budget line illustrate opportunity costs and trade-offs? How does a
budget line illustrate scarcity and the effect of limited incomes?

Answer 1

Answer:

Budget lines illustrate scarcity in that they show you are limited by your income. Since they slope downward, they show you cannot keep getting more and more of both goods. There is always a trade-off. The area beyond the budget line represents combinations of the goods that are beyond your income.