Answer:
Budget set is the set of all consumption bundles of two goods that a consumer can afford at the same prices of goods which is given. It also shows the income level of consumers. The budget set changes because of changes in the price of the goods and changes in the income of consumer. Using M as income, \[{{P}_{1}}\] as price of good X. \[{{P}_{2}}\] as price of good Y. A consumer can buy any bundle which he can get by spending M on good X and good Y in the following manner: \[{{P}_{1}}X+{{P}_{2}}Y\le M\] This means money spent on good X and good Y should not exceed income. If there is any change in the budget set it takes place due to change in money variables fulfilling the basic condition stated above.
You need to login to perform this action.
You will be redirected in
3 sec
