explain the budget line with the help of a suitable diagram
Answers
Explanation:
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The Budget Line, which is also known as Budget Constraint, exhibits all the combinations of two commodities that a customer can manage to afford at the provided market prices and within the particular earning degree. The budget line is a graphical delineation of all feasible combinations of two commodities that can be bought with provided income and cost so that the price of each of these combinations is equivalent to the monetary earnings of the customer. It is important to keep in mind that the slope of the budget line is equivalent to the ratio of the cost of two commodities. The slope of the budget constraint possesses distinctive importance. In other words, a budget line slope can be described as a straight line that bends downwards and includes all the potential combinations of two commodities which a customer can purchase at market value by assigning his/her entire salary. The budget line concept is different from the Indifference curve, though both are necessary for consumer equilibrium.