Why does budget line shift to the right?
If the prices of the two commodities remain constant, the consumer’s budget line moves to the right as his or her income rises. Similarly, if the prices of both commodities X and y decrease while the consumer’s income stays unchanged, the budget line would move to the right.
What do you mean by shift in budget line?
Shifts in Budget Line. The budget line is derived on the basis of the income of a consumer and the prices of commodities in the market. Any change in the consumer’s income or the prices of commodities would result in a change in the budget line. This phenomenon of change is called a shift in budget line.
Which of the following will lead to a shift in budget line?
Increase in income of the consumer is the only cause that leads to a parallel shift of budget line to the right.
When can a budget line shift towards right?
If prices of two goods remain unchanged, then with an increase in income, budget line of the consumer shifts to the right and vice versa. Similarly, if income of the consumer remains unchanged, the budget line will shift to the right when there is a proportionate fall in the prices of both goods X and Y and vice versa.
What are the two determinants of the budget line?
The determinants of budget line are money income of the consumer, price of good 1 and price of good 2.
How does the budget constraint shift and swing?
The budget/price line or the budget constraint shifts outward to the right when there is a rise in income available to the consumer. Similarly, a fall in the level of income, product prices remaining unchanged, the price line shifts the left side from the original position.
Why is budget line downward sloping?
Budget line is a downward sloping line because given the prices of goods X and Y, and income of the consumer, more of Good-X (on X-axis) can be purchased only when less of Good-Y (on Y-axis) is purchased. Was this answer helpful?
When can a budget line shift?
The budget line will shift when there is: A change in the prices of one or both products with nominal income (budget) remaining the same. A change in the level of nominal income with the relative prices of the two products remaining the same.
What is the budget line when can it shift to the right?
Which of the following is the 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 budget set explain what can lead to change in budget set?
A budget set can change when: The money income of a consumer changes. If money income increases, a consumer can buy more of both goods. The reverse happens if money income decreases. The prices of the goods change.
Why does a budget line rotate and shift?
A budget line shows the maximum consumption of a consumer at a given income level. It shifts parallelly when there is a change in income but rotates when the relative prices change. A budget line is also called a budget constraint because it limits total consumption possibility of a consumer.