Economics Exam > Economics Videos > Microeconomics- Interaction between individual buyer-seller > Introduction to Budget Line
Introduction to Budget Line Video Lecture | Microeconomics- Interaction between individual buyer-seller
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FAQs on Introduction to Budget Line Video Lecture - Microeconomics- Interaction between individual buyer-seller
| 1. What is a budget line? |  |
Ans. A budget line represents the various combinations of two goods that a consumer can afford given their income and the prices of the goods. It shows the maximum quantity of one good that can be purchased when spending all income on two goods at their respective prices.
| 2. How is the budget line determined? | |
Ans. The budget line is determined by the consumer's income and the prices of the goods. The slope of the budget line is equal to the ratio of the prices of the two goods. The intercepts of the budget line on the horizontal and vertical axis represent the maximum quantity of each good that can be purchased with the given income.
| 3. What does a budget line's slope indicate? | |
Ans. The slope of a budget line indicates the rate at which one good can be exchanged for another. It represents the relative price of the two goods. If the slope is steeper, it means that the price of one good is relatively higher compared to the other.
| 4. How does a change in income affect the budget line? | |
Ans. A change in income affects the position of the budget line. If income increases, the budget line shifts outward, allowing the consumer to afford more of both goods. Conversely, a decrease in income shifts the budget line inward, reducing the quantity of goods that can be purchased.
| 5. Can the budget line shift due to changes in prices? | |
Ans. Yes, changes in prices can cause the budget line to shift. If the price of one good increases while the price of the other remains constant, the budget line becomes steeper, indicating that less of the expensive good can be purchased. Similarly, if the price of one good decreases, the budget line becomes flatter, allowing for more of that good to be purchased.
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Dec 25, 2024 Last updated |
Video Description: Introduction to Budget Line for Economics 2024 is part of Microeconomics- Interaction between individual buyer-seller preparation.
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