A consumer spending on various types of goods is according to their school.
Budget is set according to the income of consumer.
For example: Mr. X, has an income of Rs. 10000/month. He wants to spend Rs. 8000 and save Rs.2000. Out of his Rs.8000 he wants to buy food and clothes for himself. Food is of 100/unit and clothing of 200/unit. Now there is a budget line. Either he can buy 80 units of food or 40 units of clothes or a combination of both that lie inside the budget line.
Suppose the income of Mr. X is increased to double there will be a parallel shift away from origin in the budget line. The purchase capacity of X is increased. Or the price of anyone good is increased, the quantity will change. Combinations of goods purchased will always lie under the budget line. Amount of food sacrificed to buy clothes is the opportunity cost of food and vice versa.
Budget is set according to the income of consumer.
For example: Mr. X, has an income of Rs. 10000/month. He wants to spend Rs. 8000 and save Rs.2000. Out of his Rs.8000 he wants to buy food and clothes for himself. Food is of 100/unit and clothing of 200/unit. Now there is a budget line. Either he can buy 80 units of food or 40 units of clothes or a combination of both that lie inside the budget line.
Suppose the income of Mr. X is increased to double there will be a parallel shift away from origin in the budget line. The purchase capacity of X is increased. Or the price of anyone good is increased, the quantity will change. Combinations of goods purchased will always lie under the budget line. Amount of food sacrificed to buy clothes is the opportunity cost of food and vice versa.
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