According to the NCERT glossary, the budget line consists of all bundles which:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → cost exactly equal to the consumer’s income
The budget line holds the bundles whose cost is equal to the consumer’s whole income. It is the boundary of what she can afford.
Option (1) give the consumer the same level of utility — Incorrect. Bundles that give the same level of utility lie on an indifference curve.
Option (2) cost less than or equal to the consumer’s income — Incorrect. Bundles that cost less than or equal to the income form the budget set, which includes points below the line.
Option (3) the consumer prefers to every other affordable bundle — Incorrect. The bundle she prefers to every other affordable bundle is her optimum, one point on the line.
Option (4) cost exactly equal to the consumer’s income — Correct. Every bundle on the line uses up the whole income.
NCERT (2026-27): Glossary: “Budget line – consists of all bundles which cost exactly equal to the consumer’s income.” Glossary: “Budget set – is the collection of all bundles that the consumer can buy with her income at the prevailing market prices.” “2.2.1 Budget Set and Budget Line … All bundles in the positive quadrant which are on or below the line are included in the budget set. The equation of the line is p1x1 + p2x2 = M (2.2) The line consists of all bundles which cost exactly equal to M. This line is called the budget line. Points below the budget line represent bundles which cost strictly less than M. …” |