Therefore, price can be considered constant and the budget line is a simple straight line. There are cases where budget lines are not straight and will deal with those later. The budget line identifies alternative market baskets available to the consumer and how income and prices can effect their options. The actual market baskets consumers decide to purchase depend on their tastes and preferences about the goods. Economist cannot predict everyone s exact taste but we may make general observations about the characteristics shared by the preferences of virtually everyone.
Preferences are complete.
We may rank order our preferences. I prefer my Dell computer to a Gateway and a Gateway to a Micron. Or I am indifferent between a gateway and a HP. 2. Preferences are transitive. I cannot prefer a Micron to a Dell.