Question

Derive to prove the slope of the budget line is price ratio of two goods
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Answer 1

Answer:

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Answer 2

Budget line

Explanation

The slope of the budget line is price ratio of two goods because in order to gain the more of good one individual have to sacrifice some of good two.

• So there becomes a negative relationship because of which the budget lines slopes downward.
• For more see the diagram below.
• In the diagram m/p1 is means that the consumer is consuming only good 1.
• M/P2 means that the consumer is consuming only good 2.