––– = –––– = ––X–
OB I/PX PY
The slope of the budget line therefore equals the ratio of the prices of the two goods.
The budget line will shift if any of the following occur:
100 SECTION 2 · DEMAND AND SUPPLY
budget line a
budget line (or
price-ratio line)
shows the
maximum
combinations of
two goods the
consumer could
buy from a given
level of income