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Explain how individuals are constrained by their income and the prices they face...

Oct 30, 2023

Explain how individuals are constrained by their income and the prices they face?

answer: Individuals are constrained by their income and the prices they face because their income determines the amount of goods and services they can afford to purchase, while prices determine the cost of those goods and services.

Key Concept

Income and prices determine individuals' purchasing power.

Explanation

Income represents the amount of money individuals have available to spend on goods and services. If their income is low, they will have less purchasing power and may be limited in the quantity or quality of goods and services they can afford. Prices, on the other hand, reflect the cost of goods and services in the market. Higher prices reduce individuals' purchasing power, as they will be able to afford fewer goods and services with the same amount of income. Therefore, individuals are constrained by their income and the prices they face, as these factors determine their ability to consume and make choices in the market.

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