The teacher wrote an equation on the blackboard and asked them what does this equation represents. Imagine you are a student in her class. What would be your answer? The equation is as follows: $p_1 x_1+p_2 x_2=M$

Budget Line

The correct answer is Option 2: Budget Line

The equation of the budget line is $p_1 x_1+p_2 x_2=M$.

The line consists of all bundles which costs exactly equal to M. That means that the cost of all the bundles is exactly equal to the money income of the consumer.