Explain the meaning of 'Budget set' and ' Budget line'.

1.	Explain the meaning of 'Budget set' and ' Budget line'.
Answer» A budget set represents those combinations of consumers bundles that are available to the consumer given his/her income level and at the existing market prices. In other words, it represents those consumption bundles that the consumer can purchase using his/her money income (M). A budget line represents the different combinations of two goods that are affordable and are available to a consumer given his/her level of income and the market price of the goods. The equation of the budget line is represented as follows : P₁x₁+P₂x₂ = M With the help of the budget line, we can estimate the amount of income that is spent on different goods.

Answer»

A budget set represents those combinations of consumers bundles that are available to the consumer given his/her income level and at the existing market prices. In other words, it represents those consumption bundles that the consumer can purchase using his/her money income (M).

A budget line represents the different combinations of two goods that are affordable and are available to a consumer given his/her level of income and the market price of the goods. The equation of the budget line is represented as follows :

P₁x₁+P₂x₂ = M

With the help of the budget line, we can estimate the amount of income that is spent on different goods.

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