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प्रश्न
Explain the meaning of Budget line.
Define budget line
उत्तर १
A budget line shows various combinations of two goods which a consumer can purchase with the given income and the prices of the two goods when the consumer spends the entire income.
The equation of the budget line:
`P_1X_1 + P_2X_2 = M`
Where,
P1 - per unit price of Good 1
P2 - per unit price of Good 2
X1 - quantity of Good 1
X2 - quantity of Good 2
M - income of the consumer
उत्तर २
Budget line represents the different combinations of two goods that are affordable and are available to a consumer given his/her level of income and the market prices of the goods.
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संबंधित प्रश्न
A consumer buys 200 units of a good at a price of Rs 20 per unit. Price elasticity of deamnd is (–) 2. At what price will he be willing to purchase 300 units? Calculate.
Write a budget line equation of a consumer if the two goods purchased by the consumer, Good X and Good Y are priced at Rs 10 and Rs 5 respectively and the consumer's income is Rs 100.
Find Consumption Expenditure from the following:
|
National Income |
= Rs 5,000 |
|
Autonomous Consumption |
= Rs 1,000 |
|
Marginal propensity to consume |
= 0.80 |
What is a budget line?
Explain why the budget line is downward sloping.
A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.
How much of good 2 can be consumed if he/she spends his/her entire income on that good?
A consumer wants to consume two goods. The prices of the two goods are Rs 4 and Rs 5 respectively. The consumer’s income is Rs 20.
What is the slope of the budget line?
How does the budget line change if the consumer’s income increases to Rs 40 but the prices remain unchanged ?
How does the budget line change if the price of good 2 decreases by a rupee but the price of good 1 and the consumer’s income remain unchanged?
What happens to the budget set if the prices as well as the income double?
Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2 if he/she spends her entire income. The prices of two goods are Rs 6 and Rs 8. How much is the consumer’s income?
Suppose a consumer whose budget is ₹ 500, wants to consume only two goods, Good X and Good Y. The goods are respectively priced at ₹ 50 and ₹ 25.
Answer the following questions on the basis of the given information:
(a) State the budget equation of the consumer.
(b) What is the slope of the budget line?
(c) How many units can she purchase if she spends the entire ₹ 500 on Good X?
(d) How many units can she purchase if she spends the entire ₹ 500 on Good Y, given that the price of good Y has doubled?
Answer the following question.
What can cause a change in the budget line? Explain.
Answer the following question:
What is the budget line? Why the budget line is left to right downward sloping?
