Question

How does the budget line change if price of good 2 (here good x₂) decreases by a rupee but the price of good 1 (here x₁) and consumer's income remain unchanged?

Solution

With fall in price of good 2, consumer can buy more of good 2. So the budget line will rotate rightward to Y-axis but will start from the same point on Y-axis.

Some More Questions From Theory Of Consumer Behaviour Chapter

What is demand function? State a consumer's demand function.

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

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Theory Of Consumer Behaviour

How does the budget line change if price of good 2 (here good x₂) decreases by a rupee but the price of good 1 (here x₁) and consumer's income remain unchanged?

Some More Questions From Theory Of Consumer Behaviour Chapter

What is demand function? State a consumer's demand function.

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

Define indifference curve.

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

Mock Test Series

NCERT Sample Papers

Entrance Exams Preparation

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For Daily Free Study Material Join wiredfaculty

Theory Of Consumer Behaviour

How does the budget line change if price of good 2 (here good x2) decreases by a rupee but the price of good 1 (here x1) and consumer's income remain unchanged?

Some More Questions From Theory Of Consumer Behaviour Chapter

What is demand function? State a consumer's demand function.

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

Define indifference curve.

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

Mock Test Series

NCERT Sample Papers

Entrance Exams Preparation

How does the budget line change if price of good 2 (here good x₂) decreases by a rupee but the price of good 1 (here x₁) and consumer's income remain unchanged?