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Consumers are constrained in what they are able to buy due to their limited income and the prices of goods they wish to buy.

The budget line shows numerically all the possible combinations of two products that a consumer can purchase with a given income and fixed prices.

The budget line shows what combinations of two goods you are able to buy, given

your income available to spend on them and

their prices

This budget line shows various combinations of chocolate bars and candy bars that can be purchased assuming that

the price of a chocolate bar is $1 and the price of a candy bar is $2 and

the consumer has a budget of $30 to be divided between the two goods

If you are limited to a budget of $30, you can consume any combination of chocolate bars and candy bars along the line (or inside it). You cannot, however, afford to buy combinations that lie outside it.

Budget Line Features

The following are some of the budget line's properties:

Negative slope: A downward slope indicates a negative correlation between the two products.

Straight line: It indicates a continuous market rate of exchange in individual combinations.

Real income line: It represents the income and the spending size of a consumer.

Tangent to indifference curve: It is the point when the indifference curve meets the budget line.

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Economics notes  on

Budget lines

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