Question

What is a budget line? Why is it downward sloping?

Answer 1

Budget line is the locus of points showing different possible combinations of a set of 2 goods that a consumer can buy, given his income and prices of the goods. It is a downward sloping line because (given prices of goods X and Y, and income of the consumer) more of good X (on X-axis) can be purchased only when less of good Y (on Y-axis) is purchased.