Question
What do you understand by 'parametric shift of a line'? How does a line shift when its:
- Slope decreases,
- Its intercept decreases?
✓
Answer
Movement along a curve vs shift of a curve. Let $\text{C}=\bar{\text{C}}+\text{bY}$ be the consumption function Also Let $\bar{\text{C}}=5$ and b = 0.75 Thus, C = 5 + 0.75Y Consider two situations: 
- When b decreases: b is the slope of the consumption curve. When b increases from 0.75 to 0.5, then consumption curve (which is a straight line) pivots downwards. This is called a parametric shift of a graph. It is shown in the given figure:
- When $\bar{\text{C}}$ decreases: It is the autonomous part of the consumption function. It graphically gives the intercept of the consumption curve. If decreases from 5 to 3, there will be parallel downward shift in the consumption curves. It is shown in the given figure:
Thus, when slope changes, there is parametric shift in the curve. When intercept changes, there is parallel shift in the curve.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
Explore more
Similar questions
Explain how ‘bank rate’ is helpful in controlling credit creation?
A firm can sell more units of a good as it wants at a given price. Draw (a) TR curve (b) AR and MR curves of a firm. State the relationship between AR and MR curves in this case.
OR
Draw TR and MR curves of a firm which is free to sell any quantity of the good at a given price. Explain.An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following:
National Income = 1,000
Autonomous Consumption = 100
Investment = 120
The price elasticity of demand of a commodity is (-)1.5. When its price falls by ₹ 1 per unit its quantity demanded rises by 3 units. If the quantity demanded before the price change was 30 units, what was the price at this demand?
From the following data calculate net value added at factor cost:
| S. No. | | (₹in Lakhs) |
| (i) | Net factor income from abroad. | 30 |
| (ii) | Sales. | 3,500 |
| (iii) | Purchase of intermediate goods. | 2,000 |
| (iv) | Consumption of fixed capital. | 500 |
| (v) | Exports. | 400 |
| (vi) | Indirect taxes. | 350 |
| (vii) | Change in stock. | 50 |
Which of the following is/are included in the revenue budget of the government? Give reasons for your answer.
- Tax revenue.
- Non-tax revenue.
- Loans received from foreign governments.
- Small savings.
- Interest payments.
From the following table, calculate average variable cost of each given level of output:
| Output | Marginal Cost |
| 1 | 80 |
| 2 | 70 |
| 3 | 72 |
| 4 | 78 |
Giving reasons, explain the treatment assigned to the following while estimating national income:
- Family members working free on the farm owned by the family.
- Payment of interest on borrowings by general government.
State the distinction between explicit cost and implicit cost. Give an example of each.
A consumer spends Rs. 1000 on a good priced at Rs. 8 per unit. When price rises by 25 percent, the consumer continues to spend Rs. 1000 on the good. Calculate price elasticity of demand by percentage method.