Many Goods
While low level demonstrations of budget constraints are often limited to two good situations which provide easy graphical representation, it is possible to demonstrate the relationship between multiple goods through a budget constraint.
In such a case, assuming there are goods, called for, that the price of good is denoted by, and if is the total amount that may be spent, then the budget constraint is:
Further, if the consumer spends his income entirely, the budget constraint binds:
In this case, the consumer cannot obtain an additional unit of good without giving up some other good. For example, he could purchase an additional unit of good by giving up units of good
Read more about this topic: Budget Constraint
Famous quotes containing the word goods:
“Note, besides, that it is no more immoral to directly rob citizens than to slip indirect taxes into the price of goods that they cannot do without.”
—Albert Camus (1913–1960)
“Undoubtedly equality of goods is just; but, being unable to cause might to obey justice, men has made it just to obey might. Unable to strengthen justice, they have justified might—so that the just and the strong should unite, and there should be peace, which is the sovereign good.”
—Blaise Pascal (1623–1662)