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Question
What do you mean by the budget set of a consumer?
Solution
It refers to the set of consumption bundles that are available to or affordable by the consumer; while being aware of his/her income-level and the existing market prices.
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RELATED QUESTIONS
Define budget set.
Explain the meaning of Budget line.
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 |
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.
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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.
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What happens to the budget set if the prices as well as the income double?
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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.
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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?
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(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?
