Question

Budget set includes

• A. All those combinations of two goods which a consumer cannot afford
• B. All those combinations of two goods which a consumer is willing to buy
• C. All those combinations of two goods which a consumer can afford
• D. None of these

Hint:

The budget set represents all the possible combinations of goods a consumer can purchase given their income and the prices of goods.

Answer 1

The Correct Option is C

Step 1: Understanding the Budget Set:
The budget set refers to all the possible combinations of two goods that a consumer can purchase given their income and the prices of the goods. It represents the affordable choices within the consumer's budget.
Step 2: Analyzing the Options:
- Option (A): This is incorrect because the budget set includes only affordable combinations, not those that are unaffordable.
- Option (B): While a consumer may be willing to buy certain goods, the budget set is defined by what they can afford, not just what they desire to purchase.
- Option (C): This is correct as the budget set includes all the combinations of two goods that the consumer can afford, based on their income and the prices of goods.
- Option (D): This is incorrect because option (C) correctly defines the budget set.
Step 3: Conclusion:
The correct answer is option (C), which defines the budget set as all combinations of goods that a consumer can afford.