Budget Line

Budget Line Assignment Help

Budget Line

Budget line is given by the total income of the consumer that he can spend on two goods, say X and Y and how much he can buy of these two goods at their given market prices. The slope of the budget line measures the price ratio of two goods in terms of their opportunity cost. The slope of the line is also negative related to the money price ratio of two goods. Changes in income shift the budget line parallel to the original line; upwards when income rises and downwards the same change the slope of the budget line. Equal percentage change in prices of both goods lead to parallel shifts in budget line. When both prices and income change in equal proportion and money income also decreases in that proportion, budget line remains unaltered.


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