Question

Explain the meaning of budget line what cause can cause a change in it explain

Answer 1

Explanation:

As we know, income and prices can change and as incomes and prices change, there are changes in budget lines. So, we can show the effects of these changes on budget lines and consumer choices

• The Effects of Changes in Income

An increase in income causes the budget line to shift outward, parallel to the original line (holding prices constant). Which means that a consumer can buy more of both goods with more income.

• A decrease in income causes the budget line to shift inward, parallel to the original line (holding prices constant) so a consumer can buy less of both goods with less income.