The Budget Constraint

By Jodi Beggs, About.com Guide

The budget constraint is the first piece of the utility maximization framework, and it describes all of the combinations of goods and services that the consumer can afford. In reality, there are many goods and services to choose from, but economists limit discussion to two goods at a time for graphical simplicity.

In this example, we'll use beer and pizza as the two goods in question. Beer is on the vertical axis (y-axis) and pizza is on the horizontal axis (x-axis). It doesn't matter which good goes where, but it's important to be consistent throughout the analysis.

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• The Budget Constraint
• The Budget Constraint Equation
• Graphing the Budget Constraint
• Graphing the Budget Constraint
• Graphing the Budget Constraint
• Budget Constraints in General
• Another Budget Constraint Formulation

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