The price of bananas falls while the price of mangoes and the consume…

The price of bananas falls while the price of mangoes and the consumer’s income stay the same. Match List-I with List-II.

List-I		List-II
(A)	Effect of the price fall on the budget line	(I)	Substitution effect
(B)	Position of the new optimum	(II)	Income effect
(C)	Bananas replace mangoes as they are now relatively cheaper	(III)	Becomes flatter, pivoting outward
(D)	Rise in the consumer’s purchasing power	(IV)	On a higher indifference curve

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)

A fall in the price of bananas changes the budget line, moves the consumer to a new optimum, and works through two effects on demand.

List-I	List-II	Reason
(A) Effect of the price fall on the budget line	(III) Becomes flatter, pivoting outward	The slope p₁/p₂ falls; the line pivots outward around the mango end.
(B) Position of the new optimum	(IV) On a higher indifference curve	The budget set expands, so she can reach a higher indifference curve.
(C) Bananas replace mangoes as they are now relatively cheaper	(I) Substitution effect	Buying more of the relatively cheaper good is the substitution effect.
(D) Rise in the consumer’s purchasing power	(II) Income effect	The lower price raises her purchasing power; this is the income effect.

NCERT (2026-27): “2.2.2 Changes in the Budget Set … If the price of bananas decreases, i.e., p'₁< p₁, the absolute value of the slope of the budget line decreases and hence, the budget line becomes flatter (it pivots outwards around the vertical intercept and horizontal intercept increases). …”

“2.4.2 Deriving a Demand Curve from Indifference Curves and Budget Constraints … The budget set in panel (a), expands and new consumption equilibrium is on a higher indifference curve at point D, where she buys more of bananas … When bananas become cheaper, the consumer maximises his utility by substituting bananas for mangoes in order to derive the same level of satisfaction of a price change, resulting in an increase in demand for bananas.”

“Moreover, as price of bananas drops, consumer’s purchasing power increases, which further increases demand for bananas (and mangoes). This is the income effect of a price change, resulting in further increase in demand for bananas.”