In moving along a given budget line. 12 In moving along a given budget line a The prices of both products and money 2022-10-30
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A budget line represents the constraints under which an individual or household must make their consumption decisions. It shows the trade-offs that must be made between two goods, given a fixed level of income and the prices of those goods. When moving along a budget line, the consumer is making choices about how to allocate their limited resources in the most optimal way.
There are several factors that can affect the movement along a budget line. The most obvious is a change in the prices of the goods being considered. If the price of one good increases, the budget line will shift outward, reflecting the fact that the consumer now has less purchasing power. This means that they will need to choose between consuming less of that good, or finding a way to offset the price increase by consuming more of the other good or finding a way to increase their income.
Another factor that can affect the movement along a budget line is a change in the consumer's income. If the consumer's income increases, the budget line will shift outward, reflecting the fact that they now have more purchasing power. This means that they can afford to consume more of both goods, or choose to consume a higher quantity of one good at the expense of the other.
In addition to changes in prices and income, the consumer's preferences and tastes can also affect their movement along a budget line. If the consumer's preferences change, they may decide to allocate their resources differently, shifting their consumption patterns along the budget line.
Overall, the movement along a budget line reflects the trade-offs that a consumer must make in order to optimize their consumption given their constraints. By considering changes in prices, income, and preferences, the consumer can make informed decisions about how to allocate their resources in the most beneficial way.
in moving along a given budget line
Multiple Choice a Marginal costs and average variable costs would both rise. The long-run average total cost curve: Multiple Choice a displays declining unit costs so long as output is increasing. These are the two important factors that shift the budget line. Purchase more of both product A and product B d. The budget line only shows the feasible combinations of the products. . Purchase more of product A and less of product B c.
In moving along a given budget line: a) the prices of both products and money income are assumed to be constant. b) each point on the line will be equally satisfactory to consumers. c) money income varies, but the prices of the two goods are constant. d)
Multiple Choice a inelastic for price declines that increase quantity demanded from 2 units to 3 units. Solution: a multiplicative inverse is basically a reciprocal. She has a few options to allocate her income so that she receives maximum utility from a limited salary. Since the slope of the budget constraint reflects the ratio of prices, the substitution effect is the increase in the number of oranges that would be purchased given the new prices, while staying on the original indifference curve that is moving from point A to point B. The assumption is that production of one commodity decreases if that of the other one increases, given … An equilibrium therefore corresponds to a budget line which is also a price line, and the price at equlibrium is the gradient of the line.
The budget line can be written algebraically as follows: Where P x and P y denote prices of goods X and Y respectively and M stands for money income:. The law of demand states that, other things equal: Multiple Choice a price and quantity demanded are inversely related. Diminishing marginal returns means that in order to increase output at a constant rate, the firm must add larger and larger quantities of the variable inputs c. The maximum combinations of two products which a consumer can afford to buy, given prices and the consumer's income b. The price elasticity of demand is zero When the price of a product rises for an inferior good, the: Multiple Choice a. To maximize utility without spending more money, the consumer should: Multiple Choice a.
In moving along a given budget line A the prices of both products and money
A budget line is a line showing the alternative combinations of any two goods that a consumer can afford at given prices for the goods and a given level of income. We will use the term 'price line' to denote a common tangent to two indifference curves. Features of Budget Line Some of the properties of the budget line are as follows: Negative slope: If the line is downward, it shows a reverse correlation between the two products. The price elasticity of demand is unitary d. Assume the demand curve for product X shifts to the right. Refer to the diagram and assume a single good.
Diminishing marginal returns implies that the firm's profits will be shrinking. To find: multiplicative inverse. Py is the cost of product Y. Thus, all choices along a given PPF like B, C, and D display productive efficiency, but R does not. Budget Line: The graphical representation as a line that depicts one on x-axis and another good on y-axis to be consumed by the individuals is known as budget line. Qy is the quantity of product Y.
12 In moving along a given budget line a The prices of both products and money
In moving along a given budget line: a the prices of both products and money income are assumed to be constant. The budget set indicates that the combinations of the two commodities are placed within the affordability margin of a consumer. In order to maximize utility, Mary should buy more of B and less of A d. Income of the customers: The income of the customer is limited, and it is designated to buy only two products. In order to maximize utility, Mary should buy more of A and less of B When a firm is experiencing diseconomies of scale: Multiple Choice a. The quantities of two products a consumer is willing to buy at different income levels c. A new budget line would have to be drawn if either a Income of the consumer changes, or b Price of the commodity changes.
On a curve like this, the slope is constantly changing. In moving along a given budget line: A. We can maximize or total utility at all of these other points in between, along our budget line. The above budget-line equation 1 implies that, given the money income of the consumer and prices of the two goods, every combination lying on the budget line will cost the same amount of money and can therefore be purchased with the given income. Budget Line: All You Need to Know Budget line definition The budget line, also known as the budget constraint, exhibits all the combinations of two commodities that a customer can manage to afford at the provided market prices and within the particular earning degree. The price elasticity of supply is zero b.
Let us understand this with the example of apples and bananas: 1. Similarly, if the price of B increases and the other factors remain steady, the demand for product B automatically decreases. Real income line: It denotes the income and the spending size of a customer. Indifference Curves and a Budget Constraint. B shows the limits to what can be consumed. If the demand for product X is inelastic, a 4 percent increase in the price of X will: Multiple Choice a decrease the quantity of X demanded by more than 4 percent. Economists use the term "demand" to refer to: Multiple Choice a a particular price-quantity combination on a stable demand curve.
With a downsloping demand curve and an upsloping supply curve for a product, an increase in consumer income will: Multiple Choice a increase equilibrium price and quantity if the product is a normal good. Incorrect c unit elastic for price increases that reduce quantity demanded from 5 units to 4 units. For instance, if the price and income of product A remains constant and the price of product B decreases, then the buying potential of product B automatically increases. Also, read: What is a Budget Set? Implicit and explicit costs are different in that: Multiple Choice a explicit costs are opportunity costs; implicit costs are not. Income and substitution effects will encourage consumers to purchase more of the product b. E None of the above answers is correct.
To perform a moving average forecast, the revenue data should be placed in the vertical column. This information provides the basis for the budget line shown in Figure 2. Qx is the quantity of product X. Marginal rates of substitution are graphed along an indifference curve which is usually downward sloping and convex. Taken informally, the budget line describes the boundary of affordability for a given budget and specific goods. Income and substitution effects will encourage consumers to purchase less of the product c.
