How does the slope of a budget line illustrate opportunity cost and trade-offs?
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Tradeoffs and opportunity costs – the negative slope of the budget line represents that consumers must make tradeoffs in their consumption decisions; the value of the slope measures precisely the opportunity cost of one more unit of a good under analysis. c. Limited income and positive prices force people to choose.
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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.
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