What happens to Meena’s budget line after the fall in the price of ap…

Case study: Meena spends her weekly fruit budget of Rs 120 on apples and bananas. Apples cost Rs 20 per kg and bananas Rs 10 per dozen, and she buys 3 kg of apples and 6 dozen bananas. The next week, the price of apples falls to Rs 15 per kg. Her budget and the price of bananas stay the same. Apples are measured on the horizontal axis and bananas on the vertical axis.

What happens to Meena’s budget line after the fall in the price of apples?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → It pivots outward about the vertical intercept, and the horizontal intercept becomes 8 kg

Only the price of apples, the good on the horizontal axis, has fallen. So the budget line becomes flatter and pivots outward around the vertical intercept.

Old horizontal intercept = 120/20 = 6 kg

New horizontal intercept = M/p_apples = 120/15 = 8 kg

Vertical intercept = M/p_bananas = 120/10 = 12 dozen, unchanged

A parallel shift needs a change in income; here her budget is the same.

NCERT (2026-27): “2.2.1 Budget Set and Budget Line … The budget line is a straight line with horizontal intercept M/p₁ and vertical intercept M/p₂. The horizontal intercept represents the bundle that the consumer can buy if she spends her entire income on bananas. Similarly, the vertical intercept represents the bundle that the consumer can buy if she spends her entire income on mangoes. …”

“2.2.2 Changes in the Budget Set … Note that the vertical intercept of the new budget line is the same as the vertical intercept of the budget line prior to the change in the price of bananas. However, the slope of the budget line and horizontal intercept have changed after the price change. … 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). …”