Advertisements
Advertisements
प्रश्न
Answer the following question:
What is the budget line? Why the budget line is left to right downward sloping?
Advertisements
उत्तर
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. The equation of the budget line is represented as follows.
`P_1X_1+P_2X_2 = M - P_1/P_2` represents the slope of budget line. This is also called the price ratio. The negative sign depicts the negative slope of the budget line from left to right.
The budget line slopes downward from left to right because with a given income, a consumer cannot buy a higher amount of both goods. Rather, to increase the purchase of one good, the consumer will have to reduce the purchase of the second good. Thus, the curve slopes downward.
