Admin What is a slope of budget line?
The slope of the budget line is the is the ratio of the prices of good 1 and good 2. This would mean price of good on the x axis divided price of goods on the y axis. The slope of a budget line is always negative as it is downward sloping.
What is the budget line in economics?
Budget line is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer.
What is price line or budget line?
Budget line definition The budget line is a graphical delineation of all possible combinations of the two commodities that can be bought with provided income and cost so that the price of each of these combinations is equivalent to the monetary earnings of the customer. The consumer’s purchasing power (his/her income)
What else is budget line called?
The other name of Budget line is Price line. “A budget line or price line represents the various combinations of two goods which can be purchased with a given money income and assumed prices of goods”.
How do you find the slope of a line in economics?
The slope of a line is determined by taking the change in the vertical amount divided by the change in the horizontal amount. We will let the Greek symbol Delta represent the change. In our example, as x increases by 2, y increases by 4 so the slope would a positive 2.
Why does budget line slope downward?
The budget line is downward sloping because when more and more units of one good are bought, it leads to a decrease in some units of other goods, with the given income.
What is budget line example?
Example of Budget Line Suppose, a consumer has an income of Rs. 50, and it will be used to buy commodity X and Y. The required budget line is obtained by plotting the above budget against the following graph. In the graph, the X-axis represents commodity X, and Y-axis represents commodity Y.
Why is budget line called price line?
Budget line is also called Price line because price of one unit of good -1=price of two units of good -2. Price line shows that 30 units of good 1 are equal to 60 units of good 2 in the market. Suppose income is rs 60. Thus the price line shows the price ratio between good -1 and good -2.