A consumption bundle inside the budget line

• A. Is unaffordable
• B. Implies a situation where the consumer spends all of his income on both goods
• C. Implies a situation where the consumer purchases only one good
• D. Is affordable and all available income has been spent
• E. Is affordable but has some unspent income

Answer: (E)

Verified step by step guidance

1. Understand the concept of a budget line: A budget line represents all possible combinations of two goods that a consumer can purchase given their income and the prices of the goods.
2. Identify what it means for a consumption bundle to be inside the budget line: A bundle inside the budget line means that the consumer is spending less than their total income, hence it is affordable.
3. Differentiate between being on the budget line and inside it: Being on the budget line means all income is spent, while being inside means there is some unspent income.
4. Analyze the options given: The correct interpretation of a bundle inside the budget line is that it is affordable but not all income is used.
5. Conclude that a consumption bundle inside the budget line is affordable and indicates that the consumer has some unspent income, as they are not using their entire budget.