WebWith the budget line PL 1 the consumer is in equilibrium at point Q 1 on the price consumption curve PCC at which the budget line PL 1 is tangent to indifference curve IC 1. ... The demand curve slopes downward because of two forces, namely, income effect and substitution effect. Both the income effect and substitution effect usually work ... WebNow, the consumer has three options to spend all of his income: 1. Buy 2 units of X, 2. Buy 2 units of Y, or 3. Buy 1 unit of X and 1 unit of Y. That is, possible bundles can be: (2, 0), (0, 2) or (1, 1). When all these three bundles are represented graphically, a downward sloping straight line, known as ‘Budget Line’, is obtained.
Budget Line: Notes on Budget Line, Space, Changes and Slope
WebDownward Slope: In a curve, when the consumption of one commodity increases, the consumption of another decreases for any combination. Since it indicates a positive marginal rate of substitution (MRS), ensuring … WebMar 3, 2024 · 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. … for married women mrs used
The Budget line in economics - Learn with Anjali
WebB. Indifference curve is downward sloping. C. Indifference curve is concave to origin. D. Two indifference curves cannot intersect each other. Answer: C. Q.5 Hicks and Allen believed that utility: A. Can be measured in cardinal numbers. B. Can be measured in ordinal numbers. C. Cannot be measured. D. Cannot be expressed. Answer: B WebThe slope of the budget constraint is determined by the relative price of the two goods; thus, the slope of the original budget line is determined by the original relative prices, while the slope of the new budget line is determined by the new relative prices. ... Indifference curves slope downward because, if utility is to remain the same at ... WebPoint P is an arbitrary point on this axis which shows the price of X when the budget line is PQ in the upper diagram. ... the ordinary demand curve will slope downward but will be elastic than the compensated demand curves D 1 and D 2 because the substitution effect is stronger than the income effect in the case of the ordinary demand curve ... difference in dds and dmd