How does the budget line change if the price of good 2 decreases by a rupee but the price of good 1 and the consumer’s income remain unchanged?
The budget line will be expressed as
4X + 4Y = 20
The slope of new budget line will be
- 4/4 = X/Y
X/Y = - 1
The new budget line will also pivot outwards around the same horizontal intercept –
6