According to the Theory of Consumer Behaviour, Inequality \( p_1x_1 + p_2x_2 \le M \) is called the Consumer's _____.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Budget Constraint
The inequality \( p_1x_1 + p_2x_2 \le M \) is called the consumer’s budget constraint.
The left side is the cost of a bundle. It has \( x_1 \) units at price \( p_1 \) and \( x_2 \) units at price \( p_2 \). M is the consumer’s income. So the inequality says that she can buy a bundle only if it costs no more than her income.
Option (1) Budget — Incorrect. This is a general word for a plan of income and spending. It does not name the limit that the inequality shows.
Option (2) Budget Set — Incorrect. The budget set is the collection of all bundles she can buy at the given prices and income. These bundles are the ones that satisfy the inequality, so the set is not the inequality itself.
Option (3) Budget Constraint — Correct. Her limited income restricts her choice of bundles, and the inequality states this restriction.
Option (4) Budget Behaviour — Incorrect. There is no such term.
NCERT (2026-27): Introductory Microeconomics — Chapter 2: Theory of Consumer Behaviour
|
