Budget constraint

A budget constraint is the set of combinations of goods and services a person or organization can afford given available resources and their prices.

Budget line: A line showing combinations of two goods that exhaust a fixed budget at given prices. It draws the boundary of affordable combinations when all resources are spent.
Disposable income: Income remaining after taxes and mandatory deductions, available for spending or saving. It is a common measure of the resources available to a household.
Household budget: A plan or accounting of a household’s income, spending, saving, and borrowing. Household choices translate the abstract constraint into everyday spending limits.
Liquidity constraint: A restriction on access to cash or liquid assets when payments are due. It can block purchases despite sufficient resources in a broader accounting sense.
Opportunity cost: The value of the best alternative given up when a choice is made. Spending more on one good leaves fewer resources for alternatives.
Price: The amount of money or other value exchanged for a good or service. Each price determines how quickly a purchase uses up available resources.
Intertemporal choice: A choice involving the allocation of resources across different periods of time. Saving and borrowing connect current affordability to future consumption.
Production possibility frontier: A curve showing the maximum combinations of outputs an economy can produce with its resources and technology. It describes production feasibility, whereas a budget constraint describes purchasing feasibility.
Relative price: The price of one good expressed in terms of another good or a common measure. Relative prices determine the slope of the budget line and the trade-off between goods.
Consumption set: The set of bundles of goods and services considered possible for a consumer. The budget constraint narrows possible bundles to those that can be afforded.

Linked from 13 pages