Explain the meaning of Budget line.
Define budget line
A budget line shows various combinations of two goods which a consumer can purchase with the given income and the prices of the two goods when the consumer spends the entire income.
The equation of the budget line:
`P_1X_1 + P_2X_2 = M`
P1 - per unit price of Good 1
P2 - per unit price of Good 2
X1 - quantity of Good 1
X2 - quantity of Good 2
M - income of the consumer
Budget line represents the different combinations of two goods that are affordable and are available to a consumer given his/her level of income and the market prices of the goods.