In the above diagram Budget Line goes Flatter from $P_1\, P_2$ to $P_2\, P'_1$. The reason for Budget Line being Flatter is
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : Bananas Price Decreases
Explanation :
- When the price of bananas decreases, it makes bananas more affordable in comparison to mangoes.
- This change in relative prices leads to an increase in the quantity of bananas that can be purchases with the same amount of money (budget).
- As a result, the budget line rotates outward or becomes flatter, reflecting the increased purchasing power for bananas.