English

Explain the meaning of ‘Budget set’.

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Question

Explain the meaning of ‘Budget set’.

Explain
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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.

An 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

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Chapter 2: Consumer's Equilibrium - REVISION EXERCISE [Page 2.57]
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