Question

Budget Set is ...................

• A. Given the prices of the goods and the income of a consumer.
• B. Any bundle as long as it costs less than or equal to the income.
• C. A set of price available to producer.
• D. Set of bundles available to the consumer.

Hint:

The budget set includes all affordable bundles. The budget line is the boundary case where total spending equals income.

Answer 1

The Correct Option is B

Step 1: Definition of Budget Set.
The budget set is the set of all possible bundles of goods that a consumer can afford, given income and prices. Mathematically: \[ p_1x_1 + p_2x_2 \leq M \] where \(p_1, p_2\) are prices of goods, \(x_1, x_2\) are quantities, and \(M\) is consumer income. Step 2: Checking each option.
- (A) Only mentions prices and income, but not bundles → incomplete.
- (B) Correct, since budget set = all affordable bundles (within or equal to income).
- (C) Refers to producers, not consumers → wrong.
- (D) Mentions bundles, but doesn’t include affordability → incomplete.
Step 3: Conclusion.
Hence, option (B) is the most accurate definition.
Final Answer: \[ \boxed{\text{Any bundle as long as it costs less than or equal to the income.}} \]