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Forward and Backward shift in the Price Line

In two cases, budget line moves forward. They are:
  • When the money income of the consumer increases, price of the commodity being constant.
  • When the price of the commodity decreases, income being constant.
For Example: If the income of the consumer increases from ₹ 50 to ₹ 75, then the consumer either can buy 5 units of commodity A (Price = ₹ 15) or if the consumer spends all his income on the purchase of commodity B he can buy 7.5 units of commodity B (Price = ₹ 10). Hence the price line makes a forward shift.
 
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Similarly when the price of the commodity decreases, income being constant budget line moves forward.
 
For Example: Income of the consumer is ₹ 60. Earlier price of commodity A was ₹ 15 and commodity B was ₹ 10. Now income of the consumer being constant A commodity price has decreased to ₹ 10 and B commodity price has decreased to ₹ 7.5. Even in this case budget line moves forward.
 
In two cases, budget line moves backward. They are:
  • When the money income of the consumer decreases, price of the commodity being constant.
  • When the price of the commodity increases, income being constant.
If the income of the consumer decreases from ₹ 50 to ₹ 45, then the consumer either can buy 3 units of commodity A (Price = ₹ 15) or if the consumer spends all his income on the purchase of commodity B he can buy 4.5 units of commodity B (Price = ₹ 10). Hence the price line makes a backward shift. Similarly if the price of commodity A increases to ₹ 20 and Commodity B price increases to ₹ 15, budget line moves backwards.




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