budgetlijn

A budgetlijn, or budget line, is a concept in microeconomics that represents all combinations of two goods that a consumer can afford given their income and the prices of the goods. It summarizes the budget constraint faced by the household.

Mathematically, if the two goods are x and y with prices p_x and p_y and the consumer has income I, the budget constraint is p_x x + p_y y = I. Points on the line show affordable bundles, while points inside the area p_x x + p_y y ≤ I are also affordable (and any point outside is not). The intercepts are obvious: when y is zero, x = I/p_x; when x is zero, y = I/p_y. The slope of the line is −p_x/p_y, reflecting the trade-off between the two goods: for every additional unit of one good, the consumer must give up p_x/p_y units of the other good to stay within the budget.

In practice, the budgetlijn helps illustrate how a consumer can allocate limited resources. It is a key component of the budget constraint in consumer choice theory, which combines the budgetlijn with indifference curves to analyze optimal consumption choices under given prices and income. The line depends on income and prices: an increase in income shifts the line outward in a parallel fashion, while a change in the price of one good rotates or pivots the line around the intercept associated with the other good. A higher price makes the line steeper, reducing the affordable quantity of the good with the higher price.

Limitations include the two-good simplification and the assumption of a single budget constraint; real-life choices may involve more goods, non-money considerations, and other constraints.