Economics, 3rd Edition

budget

 

 

constraint

 and shows the consumption bundles that the consumer can afford given a specified income. 

Five points are marked on this figure. At point A, the consumer buys no cola and consumes 100 pizzas. 

At point B, the consumer buys no pizza and consumes 500 litres of cola. At point C, the consumer buys 

50 pizzas and 250 litres of cola. At point C the consumer spends an equal amount (

€500) on cola and pizza. 

Point D is inside the budget constraint.

FIGURE 5.1

The Consumer’s Budget Constraint

The budget constraint shows the various bundles of goods that the consumer can afford for a given income. Here the consumer buys 

bundles of cola and pizza. The table and graph show what the consumer can afford if his income is 

€1,000, the price of cola is €2 and 

the price of pizza is 

€10.

Quantity

of cola

500

250