Question

What do you mean by budget set and Budget line

Answer 1

Budget set

The attainable combination formed by the two goods when the income of consumer as well as price of the goods are mentioned is called budget set.

Factors that affect budget set are -

• Price of good 1 .

• Price of good 2 .

• Income of consumer.

Budget line

It refers to all possible combination form by two goods when the income of consumer as well as price of goods are mentioned. This is represented through graph .

The consumer can spent his entire good too.

☆ The budget line is also known as Price line .

☆ The goods inside the priceline or over the priceline are attainable while the goods outside the priceline are non attainable.

☆ Equation of Budget set is P1 X1 + P2 X2 greater than or equal to Y.

☆ Equation of Budget line is P1 X1 + P2 X2 = Y.

Here P1 is price of good 1 , P2 is price of good 2

X denotes quantity of good. Y is the income of consumer.

Answer 2

Hello !

Budget set :

 A budget set or opportunity set includes all possible consumption bundles that someone can afford given the prices of goods and the person's income level. The budget set is bounded above by the budget line.

Budget line:

 Budget line is a graphical representation of all possible combinations of two goods which can be purchased with given income and prices, such that the cost of each of these combinations is equal to the money income of the consumer.

Hope It Helps u :)