Explain the difference between the equation of the budget line and budget constraint
Dear Student,
Budget line represents those combinations of consumption bundles where the consumer ends up spending all his money income. The budget line is represented by the following equation.
P 1 x 1+ P 2 x 2 = M
On the other hand, Budget constraint implies that the total amount spent on two goods together should be less than or equal to his/her given income level. In other words, budget constraint suggests that a particular consumption bundle is available or affordable to a consumer if the total money spent on both the goods is less than or equal to the total available money income.
For example,
Then, the budget constraint is
Regards