Q.Write about price line or budget line.

The price (budget) line shows every combination of two goods that a consumer can purchase with his whole money income at the prevailing prices. It is a downward-sloping straight line whose slope equals the price ratio Px/Py. It shifts outward when income rises and swivels when the price of a good changes. ## Meaning The budget line (also called the price line or price-income line) is a line that represents all the combinations of two goods that a consumer can buy by spending his entire money income at the given market prices. ## Explanation Suppose a consumer has an income of a given amount and wants to buy two goods X and Y with prices Px and Py. The budget equation is: Income = (Price of X × Quantity of X) + (Price of Y × Quantity of Y) i.e. M = Px·Qx + Py·Qy. If the consumer spends the whole income on X he gets M/Px units of X; if he spends it all on Y he gets M/Py units of Y. Joining these two extreme points gives the budget line. Every point on this line uses up the full income. ## Slope of the budget line The slope of the budget line equals the ratio of the prices of the two goods: Slope of budget line = Price of X / Price of Y = Px / Py It is negatively sloped because to buy more of one good the consumer must give up some of the other. ## Shifts in the budget line - Change in income: a rise in income shifts the budget line parallel to the right (outward); a fall shifts it to the left. The slope stays the same because prices are unchanged. - Change in price: if the price of only one good changes, the line swivels (rotates) around the poi …