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- The budget set or feasible set is the set of goods that the consumer can afford to purchase. The budget line is the pair of goods that exactly spend the budget. The budget line shifts out when income rises and pivots when the price of one good changes.
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What is a budget set?
Jun 24, 2023 · The budget set or feasible set is the set of goods that the consumer can afford to purchase. The budget line is the pair of goods that exactly spend the budget. The budget line shifts out when income rises and pivots when the price of one good changes.
The budget constraint is the upper boundary of the feasible set, which is also called the feasible frontier. The slope of the feasible frontier—corresponding to the wage—determines the size of the trade-off Karim faces: how much consumption must be given up in return for an extra hour of free time.
Apr 25, 2024 · A key difference between budget lines and budget sets is that changes in the former occur due to alterations in the budget constraint or the prices of commodities. That said, a budget set alters with changes in the price line or the prices of commodities.
Key Takeaways. The budget set or feasible set is the set of goods that the consumer can afford to purchase. The budget line is the pair of goods that exactly spend the budget. The budget line shifts out when income rises and pivots when the price of one good changes.
We’ll call Jordan’s feasible set budget set. Just as a PPF divides the choice space into those goods which are possible to produce and those which are impossible, Jordan’s budget set divides her choice space into those combinations which are “affordable” and those which are “unaffordable” with a given amount of money.
Jun 19, 2020 · The feasible set (also known as the production possibility frontier or budget line): this represents the actual tradeoffs between two goods and the constraints on your choices. We’ve seen this with the airplane production functions (where there’s a tradeoff between workers and planes) and with Alexei’s decision to study (where there’s a ...
Explain price ratios. Recreate budget lines after prices and income changes. The Budget Line. To understand how households make decisions, economists look at what consumers can afford. To do this, we must chart the consumer’s budget constraint.
