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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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The budget set is bounded above by a -dimensional budget hyperplane characterized by the equation =, which in the two-good case corresponds to the budget line. Graphically, the budget set is the subset of + that contains all the consumption bundles that lie on or below the budget hyperplane.
What is Budget Set? A budget set or a set of opportunities incorporates all feasible utilisation bundles that someone can manage provided the cost of commodities and the person’s earning degree. The budget set is always bounded above by the budget line.
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.
- Exploring The Policy Question
- Description of The Budget Constraint
- The Slope of The Budget Line
- Changes in Prices and Income
- Coupons, Vouchers, and Taxes
What are some of the budget implications for a consumer who owns a hybrid car? What purchase decisions might this consumer make given their savings on gas, and how does this, in turn, affect the go...
Learning Objective 3.1: Define a budget constraint conceptually, mathematically, and graphically. The budget constraintis the set of all the bundles a consumer can afford given that consumer’s income. We assume that the consumer has a budget—an amount of money available to spend on bundles. For now, we do not worry about where this money or income ...
Learning Objective 3.2: Interpret the slope of the budget line. From the graph of the budget constraint in section 3.1, we can see that the budget line slopes downward and has a constant slope along its entire length. This makes intuitive sense: if you buy more of one good, you are going to have to buy less of the other good. The rate at which you ...
Learning Objective 3.3: Illustrate how changes in prices and income alter the budget constraint and budget line. From our mathematical description of the budget line, we can easily see how changes in prices and income affect the budget line and a consumer’s choice set—the set of all the bundles available to them at current prices and income. Let’s ...
Learning Objective 3.4: Illustrate how coupons, vouchers, and taxes alter the budget constraint and budget line. Budget constraints can change due to changes in prices and income, but let’s now consider other common features of the real-world market that can affect the budget constraint. We start with coupons or other methods firms use to give disc...
- Patrick M. Emerson
- 2019
The budget set is the Walrasian, competitive or linear budget set: B = {q ∈ Rn +|p0q ≤ y} Notice this is a convex, closed and bounded set with linear boundary p0q = y. Maximum affordable quantity of any commodity is y/pi and slope dqi/dqj| = B. −pj/pi is constant and independent of total budget.
- 239KB
- 29
We can apply the budget constraint equation to Alphonso's scenario: Budget = P 1 × Q 1 + P 2 × Q 2 $ 10 = $ 2 × Q burgers + $ 0.50 × Q bus tickets. Using a little algebra, let's turn this into the equation of a line: y = b + mx. If we plug in the variables from Alphonso's scenario, we get the following:
Step 1: The equation for any budget constraint is: Budget = P 1 × Q 1 + P 2 × Q 2 Budget = P 1 × Q 1 + P 2 × Q 2 where P and Q are the price and quantity of items purchased (which we assume here to be two items) and Budget is the amount of income one has to spend.
