In this diagram, budget line goes flatter from \( P_1P_2 \) to \( P_2P_1' \). The reason for budget line being flatter is :
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Goods-B price decreases
The point on the Goods-B axis moves out from P1 to P′1, while P2 on the Goods-A axis stays where it is. So the price of Goods-B has fallen.
The budget line shows the bundles of the two goods the consumer can buy by spending all her income. Its two ends tell us how much of each good she can buy with all her income.
The slope of the line is the price of Goods-B divided by the price of Goods-A. A fall in the price of Goods-B makes this slope smaller, so the line becomes flatter.
Option (1) No change Goods-B price — Incorrect. With income and both prices the same, the budget line stays where it is.
Option (2) Goods-B price increases — Incorrect. A dearer Goods-B means less of it with all the income. P1 would move towards the origin and the line would become steeper.
Option (3) Goods-B price decreases — Correct. A cheaper Goods-B lets the consumer buy more of it, so the line pivots outwards around P2.
Option (4) Goods-A price decreases — Incorrect. A cheaper Goods-A would move the end on the Goods-A axis upwards, with P1 fixed. The line would become steeper.
NCERT (2026-27): Introductory Microeconomics — Chapter 2: Theory of Consumer Behaviour
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