question_answer

Define a budget line. When can it shift to the right?

Answer:

A budget line graphically shows the many combinations of two goods which a consumer can buy, given his entire income and the prices of the two goods. A budget line, as shown in the diagram is a straight line having a negative slope.

There will be a shift in the budget line towards right when:

(1) Income of the consumer increases, prices of both the goods given, as shown in Diagram (i).

(2) Price of either of the two commodities or of both of commodities fall, as shown in Diagram (ii).