Define a budget line. When can it shift to the right ?
sol. Budget line is a line which shows combinations of two goods that can be purchased by a consumer given his budget and the prices of Good 1 and Good 2. It can shift to the right in two case : 1.In case, there is increase in Income. 2. If pirce of Good1(X) decreases.
Is the above answer correct?
Rahul,
Answer to your question is correct except for the 2nd condition. Budget line shifts to the right when price of both the goods (P1, P2) decreases.
Answer to your question is correct except for the 2nd condition. Budget line shifts to the right when price of both the goods (P1, P2) decreases.