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The Budget Line

Level:
A-Level, IB Diploma
Board:
Edexcel, Eduqas, IB, OCR, WJEC

Last updated 21 Mar 2021

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A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.

The Budget Line

The gradient of the budget line reflects the relative prices of the two products i.e. the gradient of a budget line reveals the opportunity cost

The budget line will shift when there is:

  • A change in the prices of one or both products with nominal income (budget) remaining the same.
  • A change in the level of nominal income with the relative prices of the two products remaining the same.
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