question_answer

Distinguish between 'increase in demand' and 'increase in quantity demanded' of a good.

Or

Explain the meaning of 'Budget set' and 'Budget line'.

 

Answer:

Difference between ?increase in demand? and ?increase in quantity demanded? of a good:
	Increase in demand	Increase in Quantity demaned
(1)	Increase in demand refers to increase in quantity demanded due to change in other factors when own price of commodity remains constant.	(1) It refers to increase in quantity demanded duce to decrease in own price of the commodity when all other factors remains content.
(2)	It leads to forward shifting of demand curve.	(2) It leads to downward movement along the demand curve from left to right.
(3)	For example- In the above graph price is constant at Rs 10. But demand increases from A to B due to other factors.	(3) For example- In the above graph demand is increasing from A to B due to changes in own price of a commodity from op to \[o{{p}_{1}}\]
Meaning of Budet set: Budget set refers to attainable combinations of a set of two goods, given prices of goods and income of the consumer. The budget set equation is:
\[{{P}_{1\,\,}}{{X}_{1\,\,}}+\,\,{{P}_{2\,\,}}{{X}_{2\,\,}}\le \,\,Y\]
Where \[{{P}_{1\,\,}}\]= Price of good 1: \[{{X}_{1\,\,}}\] Quantity of good 1: \[{{P}_{2\,\,}}\] Price of good 2: \[{{X}_{2\,\,}}\] = Quantity of good 2
Meaning of Budget line: Budget line is a line showing different possible combinations of good 1 and good 2, which a consumer can buy, given his budget and the prices of good 1 and good - 2. Anywhere on the budget line, a consumer is spending his entire income either on good 1 or on good 2 or on both good 1 and good 2