Microeconomics: Theory of Consumer Behaviour · Class 11 · CBSE · Commerce Economics
Explain how a fall in the price of a commodity affects a consumer's budget set, assuming income and the price of the other commodity remain unchanged.
Practice question from Microeconomics: Theory of Consumer Behaviour (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · Subjective · Q-C88064
Explain how a fall in the price of a commodity affects a consumer's budget set, assuming income and the price of the other commodity remain unchanged.
Solution
When the price of one commodity falls, the maximum quantity of that commodity affordable with given income rises. Since the other commodity's price and income are unchanged, its intercept remains fixed, causing the budget line to rotate outward.
More from Microeconomics: Theory of Consumer Behaviour
- When marginal utility of a commodity is positive but continuously diminishing, total utility generally:
- A consumer has an income of ₹120. The prices of goods X and Y are ₹20 and ₹10 per unit respectively. Which equation represents the consumer…
- For an interior consumer equilibrium under the indifference curve approach, which condition must hold, assuming the indifference curve is c…
- A consumer has a marginal utility of money of ₹2 per utils. If the marginal utility of a commodity is 10 utils and its price is ₹4, what do…
Practise more Economics
Sign up free for adaptive practice on this chapter, with instant feedback and hints on every question.
Start practising freeFree to start · No credit card needed