The Budget Line
- A-Level, IB
- Edexcel, OCR, IB, Eduqas, WJEC
Last updated 21 Mar 2021
A budget line shows the combinations of two products that a consumer can afford to buy with a given income – using all of their available budget.
The gradient of the budget line reflects the relative prices of the two products i.e. the gradient of a budget line reveals the opportunity cost
The budget line will shift when there is:
- A change in the prices of one or both products with nominal income (budget) remaining the same.
- A change in the level of nominal income with the relative prices of the two products remaining the same.