Q.Write a short note on: Price Line/Budget Line

The price (budget) line shows all combinations of two goods a consumer can just afford with his given income at the given prices.

Explanation

The price line or budget line is a straight line that shows the various combinations of two goods which a consumer can purchase by spending his entire money income at the ruling prices of the two goods. Its slope depends on the ratio of the prices of the two goods, and a change in income shifts the line, while a change in a price changes its slope. The consumer reaches equilibrium where the budget line is tangent to the highest attainable indifference curve.

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