Budget constraint

<p>In <a href="/facts/Economics/HYctA2Dn">economics</a>, a budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within their given income. <a href="/facts/Consumer_theory/Yrpoc6fI">Consumer theory</a> uses the concepts of a <a href="/facts/Budget/5wR3hBvM">budget</a> <a href="/facts/Constraint_(mathematics)/QLFIFlFX">constraint</a> and a <a href="/facts/Preference_map/BhgfCINQ">preference map</a> as tools to examine the <a href="/facts/Parameters/zFvVFMv9">parameters</a> of <a href="/facts/Consumer_choice/Yrpoc6fI">consumer choices</a> . Both concepts have a ready <a href="/facts/Consumer_Theory/Yrpoc6fI">graphical representation</a> in the two-good case. The consumer can only purchase as much as their income will allow, hence they are constrained by their budget. The equation of a budget constraint is 
  
    
      
        
          P
          
            x
          
        
        x
        +
        
          P
          
            y
          
        
        y
        =
        m
      
    
    {\displaystyle P_{x}x+P_{y}y=m}
  
 where 
  
    
      
        
          P
          
            x
          
        
      
    
    {\displaystyle P_{x}}
  
 is the price of good X, and 
  
    
      
        
          P
          
            y
          
        
      
    
    {\displaystyle P_{y}}
  
 is the price of good Y, and m is income.
</p>

Budget constraint open-in-new

Budget constraint