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प्रश्न
What is a budget line?
What is meant by budget line?
Explain the following:
What is Budget line?
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उत्तर १
A budget line represents the different combinations of two goods that are affordable and are available to a consumer; while being aware of his/her income-level and market prices of both the goods.
Let x1 be the amount of good 1.
x2 be the amount of good 2.
P1 be the price of good 1.
P2 be the price of good 2.
P1x1 = Total money spent on good 1
P1x2 = Total money spent on good 2
Then, the budget line will be:
P1x1 + P2x2 = M
All the consumption bundles on the budget line cost the consumer exactly the equivalent of his/her income.
उत्तर २
- A budget line, also known as a price line, is a graphical representation of all possible combinations of two goods that a consumer can buy within a fixed budget, given the prices of those goods.
- The line slopes downward, indicating that to buy more of one good, the consumer must give up some quantity of the other. The steepness of the budget line reflects the ratio of the prices of the two goods.
Notes
Students should refer to the answer according to the question.
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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.
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 |
What do you mean by the budget set of a consumer?
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?
How does the budget line change if the price of good 2 decreases by a rupee but the price of good 1 and the consumer’s income 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.
Answer the following question.
What can cause a change in the budget line? Explain.
Answer the following question:
What is the budget line? Why the budget line is left to right downward sloping?
