Question
How is budget line different from budget set?
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Answer
| Basis of Difference | Budget Set | Budget Line |
| 1. Meaning | Budget set is defined in terms of this equation: $P_1 X_1+P_2 X_2 \leq Y$ | Budget line is defined in terms of this equation: $P _1 X _1+ P _2 X _2= Y$ |
| 2. Combinations included | Budget set includes all combinations of goods X and Y (given their prices) on which the actual expenditure is equal to or less than the given income of the consumer. | Budget line includes only such combinations of goods X and Y (given their prices) on which the actual expenditure by the consumer is exactly equal to his given income. Specifically, it does not include such combinations which are attainable but where: consumer's expenditure < consumer's income. |
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