.Explain shift and rotation in budget line

Ipsita Chakravarty,

Budget line will shift in 2 cases:

1) Change in income of the consumer-
If the income of the consumer increases then the budget line will shift to its right and if the income of the consumer decreases then the budget line will shift to its left.

2) Change in price of the commodity
(i) If price of both goods change then the budget line will shift to its left or right depending on the increase or decrease of the price of the good.

(ii) If the price of one good changes-
If the price of one good changes while the other remains the same, then the budget line will shift parametrically, i.e, rotation of budget line

(iii) If the price of one good increases and the price of other good decreases-
If price of one good increases and the other good decreases, then the new budget line will intersect the old budget line.

Hope this helps.