**In this article we will discuss about the shift and rotation of the budget line, explained with the help of a suitable diagram. **

In the indifference curve theory, it is assumed that the consumer purchases and consumes only two goods (here X and Y). If the prices of goods X and Y, and the money income of the consumer is given, then the equation of the budget line of the consumer would be

M̅ = p_{x}.x + p_{y}.y [eqn.(6.15)]

The slope of the budget line (6.15) is –p_{x}/p_{y} = negative, and x-and y-intercept of the line are M/p_{x} and M/p_{y}, respectively.

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Now suppose, initially the values of M, p_{x} and p_{y} are such that the budget line of the consumer has been obtained to be a line like L_{1}M_{1} in Fig. 6.7.

If now the money income (M) of the consumer rises, p_{x} and p_{y} remaining unchanged, then, the slope (-p_{x}/p_{y}) of his budget line remaining constant, the intercepts of the line (M/p_{x} and M/p_{y}) would increase.

As a result, the budget line would have a rightward parallel shift from L_{1}M_{1} to a new position like L_{2}M_{2}. Conversely, if the money income of the consumer decreases, prices remaining constant, the budget line would have a parallel shift to the left. This rightward or leftward parallel shift of the budget line is known as **“shift”** of the budget line.

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On the other hand, if the money income of the consumer remaining constant, the price of one of the goods changes, then it is known as the **“rotation of the budget line”.** For example, suppose, initially, the consumer’s budget line is L_{1}M_{1} in Fig. 6.7.

Now if the money income (M) of the consumer and the price of good Y remaining unchanged, the price of good X diminishes, then the y- intercept of the budget line (M̅/p_{y}) remains constant at OL_{1}, but the x-intercept (M̅/p_{x}) increases from OM_{1} to, say, OM_{3}.

As a result, now the budget line of the consumer would be L_{1}M_{3}. Here the budget line while changing its position from L_{1}M_{1} to L_{1}M_{3}, rotates anticlockwise about the point L_{1}. This is known as the “rotation” of the budget line.

Similarly, if M and p_{x }remaining constant, p_{y} falls, then also a rotation of the budget line from the initial L_{1}M_{1} position to a position like L_{3}M_{1}. Now the x-intercept of the budget line remaining constant, the y-intercept increases and the rotation of the budget line would be clockwise about the point M_{1}.