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Define budget line and indifference cuve. Also explain why the two are downward sloping form left to right.?

Answer» <html><body><p></p>Solution :Budget line is a graphical <a href="https://interviewquestions.tuteehub.com/tag/representation-1185381" style="font-weight:bold;" target="_blank" title="Click to know more about REPRESENTATION">REPRESENTATION</a> of all possible combinations of two goods which can be purchased with <a href="https://interviewquestions.tuteehub.com/tag/given-473447" style="font-weight:bold;" target="_blank" title="Click to know more about GIVEN">GIVEN</a> income and prices, such that the cost of each of these combinations is equal to the money income of the consumer.Indifference <a href="https://interviewquestions.tuteehub.com/tag/curve-941741" style="font-weight:bold;" target="_blank" title="Click to know more about CURVE">CURVE</a> is a curve on a graph (the axes of which represent quantities of two <a href="https://interviewquestions.tuteehub.com/tag/commodities-923550" style="font-weight:bold;" target="_blank" title="Click to know more about COMMODITIES">COMMODITIES</a>) linking those combinations of quantities which the consumer regards as of equal value.Budget line is downward sloping because when more and more units of one good can be bought, it leads to decrease some units of other good with the given income.The indifference <a href="https://interviewquestions.tuteehub.com/tag/curves-941810" style="font-weight:bold;" target="_blank" title="Click to know more about CURVES">CURVES</a> must slope down from left to right. This means that an indifference curve is negatively sloped. It slopes downward because as the consumer increases the consumption of X commodity, he has to give up certain units of Y commodity in order to maintain the same level of satisfaction.</body></html>


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