Question

According to the Theory of Consumer Behaviour, Inequality p₁​x₁​+p₂​x₂​\(≤\)M is called the Consumer's ___________ .

• A. Budget
• B. Budget Set
• C. Budget Constraint
• D. Budget Behavior

Answer 1

The Correct Option is C

The inequality \(p_1x_1 + p_2x_2 \leq M\) in economics, specifically within the Theory of Consumer Behaviour, is known as the Consumer's Budget Constraint. This equation mathematically defines the expenditure limits for a consumer, where:

• \(p_1\) and \(p_2\) represent the prices of goods \(x_1\) and \(x_2\), respectively.
• \(x_1\) and \(x_2\) denote the quantities of the goods.
• \(M\) signifies the consumer's income or budget.

The Budget Constraint illustrates all feasible combinations of goods \(x_1\) and \(x_2\) that a consumer can purchase without exceeding their income \(M\). Consumption choices are considered affordable if they fall on or below the line defined by this equation.