THE BUDGET CONSTRAINT: WHAT THE
CONSUMER CAN AFFORD
• The budget constraint depicts the limit on the
consumption “bundles” that a consumer can
afford.
– People consume less than they desire because
their spending is constrained, or limited, by their
income.
THE BUDGET CONSTRAINT: WHAT THE
CONSUMER CAN AFFORD
• The budget constraint shows the various
combinations of goods the consumer can
afford given his or her income and the prices
of the two goods.