Budget Constraints

A budget constraint refers to the limit on the quantity of goods and services that a consumer can purchase based on their income and the prices of those goods and services. It illustrates the trade-offs individuals face when deciding how to allocate their resources. Essentially, it shows what you can afford given your income and the prices of items, guiding your choices and highlighting that you can’t buy everything you want due to financial limitations. Understanding budget constraints helps in making informed financial decisions, ensuring that spending stays within one’s means.