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प्रश्न
Answer the following question.
What can cause a change in the budget line? Explain.
उत्तर
There are two factors which can cause a change in the budget line:
a. If the money income of the consumer changes
When there is a rise in the money income, this implies that the consumer can purchase more of both the goods with the same prices. With such a change the budget line shifts parallely. outwards.
On the other hand, if the money income decreases, this implies that the consumer will now be able to purchase less of both the goods with the same prices. With such a change the budget line shifts parallely inwards.
b. If price of any of the goods (P1, P2) changes
Suppose, the price of good 1 increases from P1 to P1´ with money income and price of good 2 remaining constant. Since P1 has increased, the consumer will now be able to purchase a lesser amount of good 1 with his given income. In other words, if the consumer spends his entire income on good 1 then, he will now be able to purchase a lesser amount of good 1. This implies that the horizontal intercept falls. Also, with the increase in the price of good 1, the price ratio i.e. the slope of the budget line increases.
On the other hand, when the price of good 2 increases, the budget line pivots inwards around the same horizontal intercept. The slope of the new budget line will fall and it will become flattered.
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संबंधित प्रश्न
Define budget set.
Explain the meaning of Budget line.
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.
What do you mean by the budget set of a consumer?
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.
Write down the equation of the budget line.
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 1 can the consumer consume 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.
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 ?
What happens to the budget set if the prices as well as the income double?
Suppose a consumer wants to consume two goods that are available only in integer units. The two goods are equally priced at Rs 10 and the consumer’s income is Rs 40.
(i) Write down all the bundles that are available to the consumer.
(ii) Among the bundles that are available to a consumer, identify those that cost will him/her exactly Rs 40.
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 is the budget line? Why the budget line is left to right downward sloping?
