Difference between Budget Line and Budget Set
Basis | Budget Line | Budget Set |
|---|---|---|
| Meaning | A graphical representation of all possible combinations of two goods which a consumer can purchase with the given prices and income in a way that the cost of each of these combinations is equal to the consumer’s money income. | The set of all possible combinations of the two commodities a consumer can afford to buy with his given income and price in the market. |
| Lies on | All the bundles of a budget line lie only on the budget line. | All the bundles of budget set lie either on or below the budget line. |
| Represents | A budget line represents the maximum limit a consumer can spend on buying goods. | A budget set represents all the sets of two goods that fall on or before the budget line. |
| Sets | The sets of two goods represented on the budget line are equal to the consumer’s income. | The sets of two goods represented on the budget set are equal to or less than the consumer’s income. |
| Interrelationship | A budget line is the border line of the budget set. | A budget set shows the different combinations of two goods helping in drawing a budget line. |
| Equation | M = (PA x QA) + (PB X QB) | M ≥ (PA x QA) + (PB X QB) |
Difference between Budget Line and Budget Set
A budget line and a budget set are two essential concepts that help understand consumer choice and behavior under different constraints. The budget line represents all possible combinations of two goods that a consumer can purchase given their income and the prices of the goods. The budget set includes all the combinations of two goods that a consumer can afford given their income and the prices of the goods.