What does a budget line indicate?

A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.

What does the slope of budget line indicates?

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.

Is budget line indicate income ratio?

Answer. The Budget line indicates the combination of goods a consumer can purchase given his or her income and the prices in the market. Any bundle above the budget line cannot be achieved as it cost more than the consumers income. However a bundle below the budget line cost less than the consumers income..

What does a budget line indicate Class 11?

Answer: A budget line represents the different combinations of two goods that are affordable and are available to a consumer; while being aware of his/her income-level and market prices of both the goods.

What is budget line What does the point on it indicate in terms of prices?

The Budget line shows the mix of products that a buyer can buy based on his or her income and market rates. Any package that exceeds the budget line is unattainable because it costs more than the consumer’s profits. A package below the budget line, on the other hand, cost less than the consumer’s profits.

Why is the budget line downward sloping?

The budget line is downward sloping because, in order to increase the consumption of one good, the consumption of the other good must be reduced, with constant M. The slope of the budget line is – P 1 P 2 = Δ x 2 Δ x 1 , which implies the rate of exchange or the rate at which good 2 can be substituted for good 1.