Government College & University Faislabad
Chiniot Campus
By:
SABEEHA NASIR
NABEEL HASSAN
KHURAM SAFEER
MUHAMMAD UMMAR
BBA (Bachelor of Business Admnistration)
1st (Semester)
Submitted to:
Mam Mahreen Bashir
BUDGET SET
It is the set of all possible combination of two goods which a
consumer can afford given his Income & Price in the market
Like (0,0)
(0,1)
 Properties of Budget Line
1. Downword Sloping
(Due to Inverse Relationship)
2. Straight line /Slope of Budget Line
Due to Price remain constant if price of good is
always some it cannot be change.
 FOR EXAMPLE
PA= 4
=2
PB=2
12
Budget line graph
Y
10
Mangoes
8
6
4
2
X
0
0
1
2
3
Apples
4
5
6
Consumer Equilibrium with IC and Budget Line
 Define
Consumer is a situation where consumer will get
Maximum Satisfaction with his OR her Limited
Income.
 Condition
MRS(xy)= Px(PY)
AND
MRS continuously Falls
Marginal Rate Of Substitusions – MRS
 The marginal rate of substitusions of X for Y (MRSxy) defined as the
amount of Y the consumer is willing to give up to get an additional
unit of X. As the consumer gets more and more units of X he is
willing to surrender less units of Y for each additional unit of X this is
because. The relative Impotance of X in term of Y goes on
Diminishining . This feature of the consumer ‘s behaviour is known as
the principle of diminishining marginal rate of substitusion.
 A consumer gets the same level of satisfaction along a given
indifference curve. It means that an increase in the quantity of
commodity X is always accompanied by a similar decrease in the
quantity of commodity Y. Thus, the marginal rate of substitusion must
be negative . Symbolically,
 MRSxy= -^Y/^x
 Where ^x represent change in x and ^y change in y. The above
equation represents the slope of the indifference curve at a
particular point.
Applications Of Inddeference Curve
 IN CONSUMPTION
 IN PRODUCTION
 IN THE FIELD OF EXCHANGE
 IN RATIONING
 COST OF LIVING INDEX
 IN TAXATION