A change in the price of a good and the budget line

A change in the price of a good and the budget line.
If income is held constant, and the price of one of the goods changes then the slope of the curve will change. If the price of one of the commodity increases, the budget line will move inwards and vice versa.

Increase in price of one commodity


If the price of one of the commodity increases, the budget line will move inwards



Here, the price of commodity B had increased and with the increase in price, the curve has moved inwards. Lets see the points on x axis only, when we are not buying any units of A. Earlier with Rs 12 and price of B, Rs 1, he was able to buy 12 units of B. With the increace in price of B from 1 to 1.50 Rs, Now he can can buy 8 units of B only


Decrease in price of one commodity

If the price of one of the commodity decreases, the budget line will move outwards



Here, the price of commodity B had decreased and with the decrease in price, the curve has moved outwards. Lets see the points on x axis only, when we are not buying any units of A. Earlier with Rs 12 and price of B, Rs 1, he was able to buy 12 units of B. With the decrease in price of B from 1 to 0.80 Rs, Now he can can buy 15 units of B.

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