Budget line - mapping capabilities and desires of any user

In the economic life of any one of the limitations of the subject is income.This concept still is called "budget constraints" and is accessible only to those market-based solutions that will allow consumers to use this purse.Graphically line budget constraint is represented as a straight line.It outlines the realm of possibilities.

In other words, the budget line is a range of choices that are limited for the consumer.Everyone compares your income and expenses, and as a result gets a personal budget.

For visual display of the concept is necessary to reduce the diversity of the products only to two commodities - 1 and 2. In the case of expenditure total income only for the purchase of goods 1 on the axis vertical will see a point that will show the number of units consumed by the product.The said amount may be determined by the income of the consumer on the one hand and the price of good 1 - on the other.

In the case of expenditure on the purchase of goods 2, this will be reflected point on the horizontal axis.Therefore, budget line consumer is obtained by combining two of these points.

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Proceeding from this situation can be summarized as follows.Budget line - a set of points, each of which displays a combination in certain proportions of goods 1 and 2, the purchase of which the consumer will spend their income in its entirety.On the left side of the budget line in terms characterize all the possible options for the consumer, ie,it can actually buy in the area indicated by the combination of two products (1 and 2).However, in this situation will be seen in the expenditure budget is not full.Considering the right side of the line, it can be concluded that the combination formed by said amount of generated more consumer income.

Thus, the budget line itself and the points, which are located to the left of it, is characterized by the scope of permissible values ​​selecting a particular user for a given amount of income and the corresponding prices.The scope of selection will change their size and shape depending on the income and prices of goods 1 and 2.

By increasing funds budget line moves to the right parallel to its previous location.A reduction in the figure moves to the left.

In case the changes in the price of one commodity, and the price remains the same second, the budget line to change the angle.For example, an increase in the prices of goods 1. In this case, the consumer spends all his income on the purchase of this particular product.Therefore, the budget curve will intersect the horizontal axis in the previous point, since the value of the goods 2 remained unchanged.The vertical axis is the line crosses at the lowest level.Thus, the field of consumer capacity is reduced, and the budget line becomes flatter.

Like any economic concept, a line of budgetary restriction has its own properties:

1. Since the products are located on the budget line have equivalent value, increased purchases of the product is only possible if a corresponding reduction in the purchase of another.That is why the curve assumes a negative slope due to reflection feedback variables.

2. As mentioned above, the increase in consumer income at constant prices will move the line parallel to the right.The reverse reaction with decreasing revenue - direct moves to the left.Total change in income can not change the angle of the line, just change the coordinates of points of intersection of the axes of coordinates.