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| 1. |
What is budget line or budget set |
| Answer» Budget line is a graphical representation which shows all the possible combinations of the two goods that a consumer can buy with his given income and market prices of commodities. It is also called consumption possibility line.Budget set refers to the set of all possible combinations of the two goods which a consumer can afford\xa0at his given income and prices in the market. Equation of budget set is:PX.QX + PY.Qy{tex}\\leq{/tex}M,Where PX\xa0is the price of good XQX\xa0is the quantity of good XPY\xa0is the price of good YQY is the quantity of good Y. | |