The steps below derive a consumer’s demand curve for bananas. One ste…

The steps below derive a consumer’s demand curve for bananas. One step is missing.

(A) The price of bananas falls, with the price of mangoes and income unchanged.
(B) ________
(C) The new optimum is on a higher indifference curve, with more bananas.
(D) The new price is plotted against the new quantity to get another point on the demand curve.

Which of the following is the missing step (B)?

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → The budget line pivots outward about its vertical intercept and becomes flatter

A fall in the price of bananas makes the budget line pivot outward and become flatter. This lets the consumer reach a higher indifference curve.

Option (1) The budget line pivots outward about its vertical intercept and becomes flatter — Correct. It links (A) to (C).

Option (2) The indifference curve shifts outward parallel to the old curve — Incorrect. Indifference curves show preferences; a price change does not move them.

Option (3) The budget line shifts outward parallel to the old line — Incorrect. A parallel shift comes from a rise in income with prices unchanged.

Option (4) The budget line pivots inward about its vertical intercept and becomes steeper — Incorrect. The line pivots inward and becomes steeper when the price of bananas rises.

NCERT (2026-27): “2.2.2 Changes in the Budget Set … If the price of bananas increases, ie if p'₁> p₁, the absolute value of the slope of the budget line increases, and the budget line becomes steeper (it pivots inwards around the vertical intercept and horizontal intercept decreases). 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 …”