How to figure a monthly budget?
Try a simple budgeting plan
- Allow up to 50% of your income for needs. Basic utilities. Transportation. ...
- Leave 30% of your income for wants. Separating wants from needs can be difficult. ...
- Commit 20% of your income to savings and debt repayment. Use 20% of your after-tax income to put something away for the unexpected, save for the future and pay off ...
What is above the line budget?
Below the Line – Key Differences
- Above the Line (ATL) on the income statement is profit or income separated from other expenses. ...
- ATL expenses incurred by COGS are wages to labor, manufacturing cost, and cost of raw materials, whereas BTL is operating expenses, interest, and taxes.
- It refers to income and expenses related to the normal operations of the company. ...
How to calculate overall line efficiency?
Production Line Efficiency Calculation - Information required
- Number of operators – how many operators worked in the line in a day
- Working hours (Regular and overtime hours) – how many hours each of the operators worked or how many hours the line run in a day
- Production in pieces – How many pieces are produced or total line output at the end of the day
What is a budget line in economics?
What is a Budget Line| Definition, Properties, Equation
- Properties of budget line. Budget line is a straight line. Budget line has a negative slope. ...
- Assumptions of a budget line. It is expected that the consumer would spend all of his money on only two goods. ...
- Budget line questions and answers. Let’s discuss budget line questions and answers. Why is budget line a straight line? ...
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What is the equation of budget line?
The equation of Budget Line is :M=PxQx+PyQywhere M=Money income of the consumer; Px= Price of good-X; Py=Price of good-Y Qx= Quantity of good -X; Qy= Quantity of good-Y.
How do you calculate the slope of a budget line?
The slope of the budget line is the is the ratio of the prices of good 1 and good 2. This would mean price of good on the x axis divided price of goods on the y axis. The slope of a budget line is always negative as it is downward sloping.
What is the ratio of budget line?
The meaning of the budget line's slope or price ratio is the same as the slope of a PPF. (The difference between these two curves is that the PPF shows all the different combinations given time a time/production constraint, whereas a budget line shows different combinations given budget constraint.
What is budget line function?
Budget line (also known as budget constraint) is a schedule or a graph that shows a series of various combinations of two products that can be consumed at a given income and prices. Budget line is to consumers what a production possibilities curve is to producers.
What is budget line example?
Example of a Budget Line Radha has ₹50 to buy a biscuit. She has a few options to allocate her income so that she receives maximum utility from a limited salary. To get an appropriate budget line, the budget schedule given can be outlined on a graph.
What is budget line Class 12?
Budget line is a line showing different combinations of two goods which a consumer can attain, at his given income and market price of the goods, e.g Px.Qx + PY.Qy=M. It can shift to the right due to following reasons: (i) When the level of income increases. (ii) When price of both goods falls.
Why budget line is straight line?
The slope of this line is equal to the ratio of the prices of these goods. Since the prices of the two goods are constant, the slope of the budget line is also constant. Hence, the budget line is a straight line.
What is budget class 11?
A budget line represents the different combinations of two goods that are affordable and are available to a consumer; while being aware of his/her income-level and market prices of both the goods.
Why budget line is called a price line?
Budget line is also called price line beacause the slope of Budget Lineis the ratio of prices of goods taken on each axis in 2-D diagram.
What is budget line and curve?
A budget line shows combinations of two goods a consumer is able to consume, given a budget constraint. An indifference curve shows combinations of two goods that yield equal satisfaction. To maximize utility, a consumer chooses a combination of two goods at which an indifference curve is tangent to the budget line.
How do you calculate Mrs?
A utility function can be denoted as U(Xa, Xb). To find the MRS, you can use (Xa, Xb) as a point along the indifference curve to calculate MRS. For example, MRS = -Xa / Xb.
What is budget line and budget set?
A Budget Line is the borderline that contains the Budget Set. A Budget Set is the total combination of different sets of two goods that helps draw the Budget Line. Combination of Goods. The different combinations of two goods are equal to the income of the consumer.
How do you determine a slope?
Pick two points on the line and determine their coordinates. Determine the difference in y-coordinates of these two points (rise). Determine the difference in x-coordinates for these two points (run). Divide the difference in y-coordinates by the difference in x-coordinates (rise/run or slope).
How do I determine slope?
To calculate percent slope, divide the difference between the elevations of two points by the distance between them, then multiply the quotient by 100. The difference in elevation between points is called the rise. The distance between the points is called the run. Thus, percent slope equals (rise / run) x 100.
What determines the slope of the budget constraint?
The slope of the budget constraint is determined by the relative price of the choices. Choices beyond the budget constraint are not affordable. Opportunity cost measures cost by what is given up in exchange.
How do you find the slope of an indifference curve?
1:512:59How to Derive the Slope of an Indifference Curve - YouTubeYouTubeStart of suggested clipEnd of suggested clipSo the slope of the indifference curve is minus the partial utility of utility function with respectMoreSo the slope of the indifference curve is minus the partial utility of utility function with respect X divided by well the marsh utility good Y.
How to get an appropriate budget line?
To get an appropriate budget line, the budget schedule given can be outlined on a graph. The budget set indicates that the combinations of the two commodities are placed within the affordability margin of a consumer.
What is the slope of a budget line?
In other words, the slope of the budget line can be described as a straight line that bends downwards and includes all the potential combinations of the two commodities which a customer can purchase at market value by assigning his/her entire salary. The concept of the budget line is different from the Indifference curve, though both are necessary for consumer equilibrium.
What is the point when the indifference curve meets the budget line?
Tangent to indifference curve: It is the point when the indifference curve meets the budget line. This point is known as the consumer’s equilibrium.
Why does the budget line shift?
Shift due to change in income: Change in income makes a huge difference that leads to a change in the budget line. High income means high purchasing possibility and low income means low purchasing potential, making the budget line to shift.
What are the two factors that shift the budget line?
A budget line includes a consumer’s earnings and the rate of a commodity. These are the two important factors that shift the budget line. Shift due to change in price: The amount of the product either increases or decreases from time to time.
What are the elements of a budget?
The two basic elements of a budget line are as follows: 1 The consumer’s purchasing power (his/her income) 2 The market value of both the products
Is expense the same as income?
Expense is similar to income: It is assumed that the customer spends and consumes the whole income.
How does the slope of the budget line change?
Suppose, the change in the price of the good X is greater than the variation of the good. Then, the slope of the budget line increases . If the change in the price of the good X is less than the variation of the good and the slope of the budget line decreases. If the price of the two goods varies, but in such a way that I did not vary the relation between them. So, there will be a parallel shift of the budget line as its slope does not change. The price changes of the line of budgetary restriction coupled with a change in its slope causes two effects:
What happens to the budget line when the price of one of the goods is reduced?
If the price of one of the goods is reduced, it causes the budget line to rotate to the right-up. Hence, the budget is set to increase. The value of the line also varies (since the relative price of the two goods changes).
What is the good Y in a budget constraint?
It is useful to suppose that the good Y is the money that the consumer can spend on the consumption of other goods. Automatically, we have that the Py will be equal to 1, since the price of a monetary unit is a monetary unit. Then we can write the budget constraint as follows:
Why does the budget line rotate to the left?
The rising price of one of the real causes the budget line formula to rotate to the left – down and the budget is set lower. The value of the straight line varies (since the relative price of the two goods changes).
How does raising incomes by keeping prices constant affect the budget set?
Raising incomes by keeping prices constant implies a parallel shift to the right – up the budget line and the budget set is widening . If income is reduced, the budget subtraction shifts left-down and the budget set is smaller. In neither case does the slope change as prices remain constant.
When does the budget line shift?
The budget line shifts when a consumer income changes: it shifts inwards when income decreases and shifts outwards when income increases. But when there is a change in price of only one good, the budget line rotates i.e. it shifts but not parallelly.
What is a budget constraint curve?
A budget line is a constraint in that it limits the total potential consumption of a consumer. Only such combination of two goods is attainable which falls within or on the budget line. Any combination of two goods which falls outside ...
Which curve shows different combinations of two products which give the consumer the same utility?
Together with a consumer’s indifference curves, which shows different combinations of two products which give the consumer the same utility, we can arrive at a combination of two goods which is optimal for the consumer i.e. which gives the consumer maximum attainable satisfaction.
What is a budget line?
The budget line is the set of bundles of goods that cost exactly m, i.e., which exhaust the consumer’s income. It is defined as a locus of points showing alternative combinations of x 1 and x 2 which the consumer is capable of buying from the market (where he is a price-taker and a quantity-adjuster) at prevailing prices with his fixed money income. Fig. 3.2 is a typical budget line.
What does the slope of the budget line indicate?
The slope of the budget line indicates the exchange ratio of the two goods x 1 and x 2, i.e., the rate at which he can substitute for x 2 at the market place. Let us suppose the consumer is planning to increase his consumption of x 1 by ∆x 1. To get this extra unit of x 1 he is ready to sacrifice ∆x 2 units of the second commodity (good 2).
What does it mean when a point is inside the budget line?
But any point beyond it such as U is unattainable. Any point inside the budget line indicates that his consumption bundle costs less than m. This means that he has to move from point I to point A’. ADVERTISEMENTS:
What is the vertical intercept of the budget line?
The vertical intercept (m/p 2) of the budget line (point A’) indicates the maximum amount of x 2 that he can buy if he spends all his income on it (in which case x 1 = 0). Similarly the horizontal intercept (point B) indicates the maximum amount of x 2 that he can buy with his income at price p 1 if x 2 = 0.
Budget Line Equation
Example of Budget Line
- Suppose a consumer has an income of Rs.50, and it will be used to buy commodities X and Y. To derive maximum utility from the said income, only the following options are available. The required budget line is obtained by plotting the above budget against the following graph. In the graph, the X-axis represents commodity X, and Y-axis represents commodity Y. (Image will be U…
Features of Budget Line
- The features or properties of the budget line have been indicated below. 1. Real Income Line - The real income line is dependent on the aspect of income and expenditure capacity of an individual. 2. Straight Line - The straight line indicated in the budget line signifies the existing market exchange rate for every combination shown. 3. Negative Slope - The negative downward slope o…
Assumptions of Budget Line
- The budget line is primarily based on assumptions rather than facts. However, to achieve clear and exact results and a summary, the economist considers the following criteria in terms of a budget line: 1. The consumer's income is given and remains consistent. 2. Commodity prices are provided and remain constant. 3. The customer is aware of the price of each commodity. 4. It is …
Requirements of A Budget Line
- The concept of the budget line, like most economic theories, is based on assumptions in order to produce simplified and clear analytic results. Some of them are: 1. A consumer's income is spent solely on the purchase of two commodities. 2. A consumer's total monetary earnings are constrained and known. 3. Both products' market prices are known to the customer. 4. A consu…
Consumer Budget
- Consumer budget refers to a consumer's actual purchasing power, or the amount of money he or she can spend on a total of two commodities at their current pricing. It depicts an equilibrium between a family's revenue and expenditure, based on their sources of income and costs, and is a direct depiction of their living standards.
Budget Set
- Provided a fixed income, the consumer budget leaves buyers with the solitary alternative of determining the quantity of their purchase. Given that they can only purchase two commodities, a customer's preference toward the number of units to purchase from both commodities is influenced by two factors: his or her money income and the price of each item. The cost of a go…
Budget Line Definition
Equation of A Budget Line
- To understand the concept of a budget line in a detailed manner, it is important to understand the mentioned equation. The equation of the budget line equation can be represented as follows: M = Px × Qx + Py × Qy Where, Px is the cost of product X. Qx is the quantity of product X. Py is the cost of product Y. Qy is the quantity of product Y. M is t...
Example of A Budget Line
- Radha has ₹50 to buy a biscuit. She has a few options to allocate her income so that she receives maximum utility from a limited salary. To get an appropriate budget line, the budget schedule given can be outlined on a graph. The budget set indicates that the combinations of the two commodities are placed within the affordability margin of a consumer. Also, read: What is a Bud…
Features of Budget Line
- Some of the properties of the budget line are as follows: Negative slope: If the line is downward, it shows a reverse correlation between the two products. Straight line: It indicates a continuous market rate of exchange in individual combinations. Real income line: It denotes the income and the spending size of a customer. Tangent to indifference curve: It is the point when the indiffere…
Assumptions of A Budget Line
- The budget line is mostly based on the assumption and not reality. However, to get clear and precise results and summary, the economist considers the following points in terms of a budget line: Two commodities: The economist assumes that the customers spend their income to purchase only two products. Income of the customers: The income of the customer is limited, a…
A Shift in Budget Line
- A budget line includes a consumer’s earnings and the rate of a commodity. These are the two important factors that shift the budget line. Shift due to change in price: The amount of the product either increases or decreases from time to time. For instance, if the price and income of product A remains constant and the price of product B decreases, then the buying potential of pr…
Meaning of Budget Line
- Budget line refers to straight line with downward slope indicating the distinct combinations of two commodities that can be afforded by customer at given market price and particular income allocation. In simple terms, it is a graphical representation of all feasible combinations of two commodities, purchasable with given income and cost such that each one of these combination…
Equation of Budget Line
- The understanding of budget line equation is must in order to know this concept in more detailed manner. This equation is as represented below: – M = Px × Qx + Py × Qy Px =Price of product X Py =Price of product Y Qx =Quantity of product X Qy =Quantity of product Y M =Money income of consumer The equation indicates that for buying commodity X and Y...
Features of Budget Line
- A Budget line carries special features that distinguish it from other available tools of economics. Such features of budget line are as described below: – 1. Negative Slope- The negative downward sloping line indicates inverse relationship in between the purchase of 2 products. 2. Real Income Line- Real income line is dependent upon the individual’s income aspect and expenditure capacit…
Assumptions of Budget Line
- The budget line concept, similar to most of the economic theories, is based on assumptions and not reality. For getting simple and precise results, the below mentioned points are taken into consideration by economists. 1. Two commodities- It is assumed by economists that income is spend by customers on purchase of two commodities only. 2. Market price- Customer is fully aw…
Shift in Budget Line
- Consistency of budget line is influenced by following factors: – Consumer income, price of two commodities and volume of two commodities purchased. The quantity of product purchased is up to certain extend under the control of consumer, however its price and income of consumer varies with time. These change leads to shift in the budget line. Shift due to price change:Price o…
Premises of Budget Line
- The premises of budget line are as follows- 1. Determination of commodities market price-Budget line presumes that customer is always updated about the market price of two products in consideration. The line will become infeasible if there are any alteration in prices. 2. Number of commodities- Presence of only two commodities form the basis of establishment for budget lin…
Example of Budget Line
- A person has Rs. 100 to buy biscuits. He has following options available for allocating his amount in order to derive maximum utility from limited income. The above-mentioned options are only one customer can choose to derive maximum utility out of his limited income amount i.e., Rs100. If he wants to purchase more of one commodity then he needs to sacrifice the other commodity. Con…
Basic Assumptions
Available Income
Marginal Rate of Market Substitution
Change in Income
Variations in Product Prices
- The rising price of one of the real causes the budget line formula to rotate to the left – down and the budget is set lower. The value of the straight line varies (since the relative price of the two goods changes). The cut-off point with the axis of that good whose price has not changed remains constant. However, the cut-off point of the goods who...
Budgetary Restriction – Budget Line
Changes in The Budget Restriction
Other Considerations – Budget Line