Question

The slope of the budget line in case of commodity X and Y is affected by ______.

Options

• price of commodity X-alone

• price of commodity Y-alone

• taste and preference of the consumer

• prices of both the commodities

Answer 1

The slope of the budget line in case of commodity X and Y is affected by prices of both the commodities.

Explanation:

• The slope of the budget line = Price of Good X / Price of Good Y
• It represents the rate at which the consumer can substitute one good for another while staying within their budget.
• If the price of either good changes, the slope changes.