Page 6 - LN

7
B
6
Goo
d-2 5

4

3

2

1

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L
0
0 2 4 6 8 10 12 14

Good-1

In the above diagram it is observed that income of the consumer and
price of the good-2 remaining constant with the decrease in price of
|
Good-1 the budget line rotates rightward to from BL along the
horizontal axis.

Shifting of Budget line: -

The budget line shifts right ward, when
 There is increase in income of the consumer subject to condition
the price of both the goods to remain constant.

 There is decrease in price of both the goods subject to condition
income of the consumer to remain constant.

The budget line shifts left ward, when
 There is decrease in income of the consumer subject to condition
the price of both the goods to remain constant.

 There is increase in price of both the goods subject to condition
income of the consumer to remain constant.

Rotation of Budget line: -

The budget line rotates right ward along OX-axis, when