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What is budget line ? Explain it's characteristics.?
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What is budget line ? Explain it's characteristics.?
Budget Line. Definition: The Budget Line, also called as Budget Constraint shows all the combinations of two commodities that a consumer can afford at given market prices and within the particular income level.
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What is budget line ? Explain it's characteristics.?
Definition of Budget Line
The budget line is a graphical representation of a consumer's budget constraint. It shows the combination of two goods that a consumer can afford to purchase given their income and the prices of the goods. In other words, the budget line shows the limits of a consumer's purchasing power.
Characteristics of Budget Line
The following are the characteristics of a budget line:
Conclusion
The budget line is an important tool for understanding how consumers make choices. It shows the limits of a consumer's purchasing power and the trade-offs that must be made when choosing between two goods. By understanding the characteristics of the budget line, we can better understand consumer behavior and how it is affected by changes in income and prices.
The budget line is a graphical representation of a consumer's budget constraint. It shows the combination of two goods that a consumer can afford to purchase given their income and the prices of the goods. In other words, the budget line shows the limits of a consumer's purchasing power.
Characteristics of Budget Line
The following are the characteristics of a budget line:
- Slope: The slope of the budget line represents the relative prices of the two goods. The slope is negative because the consumer must give up some of one good to obtain more of the other.
- Budget constraint: The budget line shows the maximum amount of two goods a consumer can purchase given their income and the prices of the goods.
- Feasible region: The area under the budget line and to the right of the y-axis represents the feasible region. This region contains all combinations of the two goods that the consumer can afford to purchase.
- Opportunity cost: The budget line shows the opportunity cost of one good in terms of the other. The opportunity cost is the amount of one good that must be given up to obtain more of the other.
- Budget shifts: Changes in income or prices of the goods will shift the budget line. An increase in income will shift the budget line outward, while an increase in the price of one good will rotate the budget line inward.
Conclusion
The budget line is an important tool for understanding how consumers make choices. It shows the limits of a consumer's purchasing power and the trade-offs that must be made when choosing between two goods. By understanding the characteristics of the budget line, we can better understand consumer behavior and how it is affected by changes in income and prices.
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What is budget line ? Explain it's characteristics.?
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What is budget line ? Explain it's characteristics.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is budget line ? Explain it's characteristics.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is budget line ? Explain it's characteristics.?.
What is budget line ? Explain it's characteristics.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about What is budget line ? Explain it's characteristics.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is budget line ? Explain it's characteristics.?.
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