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Define Budget Set. - Economics

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Define budget set.

Give the equation of Budget Set.

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Solution

A budget set refers to attainable bundles of a set of two goods, given the prices of goods and the income of the consumer.

Equation of the budget set is P1X1 + P2X2 < M. where

X1 = Quantity of Good-1
X2 = Quantity of Good-2
P1 = Price of Good-1
P2 = Price of Good-2

Concept: Consumer's Budget
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