combinations of F and C available to him if he spends the entire $720 per
week. He could spend all this money income on clothing and obtain 60
units of clothing and zero food each week. Or he could go to the other
extreme and purchase only food, buying 30 units of F and zero units of
Hugh could also choose an intermediate position and consume some of
both goods—for example, spending $240 to buy 10 units of F and $480 to
buy 40 units of C (point ). Points above the budget line, such as
not attainable.
The budget line shows all combinations of products that are available to the consumer given
his money income and the prices of the goods that he purchases.Properties of the Budget Line
The budget line has several important properties:
1. Points on the budget line indicate bundles of products that use up
the consumer’s entire income. (Try, for example, the point 20
20 F.)
2. Points between the budget line and the origin indicate bundles of
products that cost less than the consumer’s income. (Try, for
example, the point 20C, 10F.)
3. Points above the budget line indicate combinations of products
that cost more than the consumer’s income. (Try, for example, the
point 30C, 40F.)We can also show Hugh’s alternatives with an equation that uses symbols
to express the information contained in the budget line. Let E stand for
Hugh’s money income, which must be equal to his total expenditure on
x 1 x 2