1.

How does the budget line change if the consumer's income increases to Rs 40 but the prices remain unchanged ?

Answer»

Solution :If CONSUMER's income to Rs 40, then the consumer can buy more of both the goods. It will shift the BUDGET LINE towards RIGHT from AB to `A_(1)B_(1)`. But, new budget line will be parallel to the old budget line as there is no change in slope (i.e., price ratio) of budget line


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