Definition of Budget Set

Definition:

The budget set is the set of bundles of goods an agent can afford. This set is a function of the prices of goods and the agents endownment.

Assuming the agent cannot have a negative quantity of any good, the budget set can be characterized this way. Let e be a vector representing the quantities of the agent's endowment of each possible good, and p be a vector of prices for those goods. Let B(p,e) be the budget set.

Let x be an element of R+L; that is, the space of nonnegative reals of dimension L, the number of possible goods. Then:

B(p,e) = {x: px <= pe}
(Econterms)

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Econterms. "Definition of Budget Set." ThoughtCo, Jun. 30, 2014, thoughtco.com/definition-of-budget-set-1146041. Econterms. (2014, June 30). Definition of Budget Set. Retrieved from https://www.thoughtco.com/definition-of-budget-set-1146041 Econterms. "Definition of Budget Set." ThoughtCo. https://www.thoughtco.com/definition-of-budget-set-1146041 (accessed January 19, 2018).