In a budget constraint, the quantity of one good is measured on the horizontal axis and the quantity of the other good is measured on the vertical axis. The budget constraint shows the various combinations of the two goods that the consumer can afford.
Why is the slope of budget line negative?
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.
What is the slope of a budget line Class 11?
Answer: The budget line is a negatively downward sloping line. The slope of a budget line measures the amount of good 2 that must be sacrificed in order to get an additional unit of good 1, as the consumer’s income (M) is fixed.
What is the equation of budget constraint?
The Budget Constraint Formula PB = price of item B, while QB = quantity of item B consumed. Maria knows that her income to spend is $500, and what concerts and pizzas cost.
How do you calculate the budget line in Excel?
We measure the quantity of good 1 on the horizontal axis and that of good 2 on the vertical axis. We can depict the budget line by calculating the horizontal and vertical intercept. The intercepts are the maximum of each good the consumer can afford to buy. So, horizontal intercept = M/P 1 (the consumer buys only good 1, X 2 = 0)
How to plot a budget line on a graph?
The above Budget schedule can be plotted on a graph to obtain the appropriate budget line for this instance; Budget Set: Budget set defines all such combinations of the two goods lying within the affordability limit of a consumer.
Which is an example of a budget line?
Budget line is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer. Let us understand the concept of Budget line with the help of an example: Suppose, a consumer has an income of $20.
How is the slope of a budget line calculated?
The equation of the budget line is, therefore: We measure the quantity of good 1 on the horizontal axis and that of good 2 on the vertical axis. We can depict the budget line by calculating the horizontal and vertical intercept. The intercepts are the maximum of each good the consumer can afford to buy.
