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Economics 101: Budget Constraint | SterlingTerrell.net

Economics 101: Budget Constraint


What is a budget constraint?

A Budget Constraint is the limit to what one can afford.

To simplify this idea, it is usually depicted by a simple line showing the trade-off one faces between two goods.

For instance, maybe I can spend my limited budget on 100 cups of coffee, 200 cups of tea, or some trade-off in between.

The slope of this trade-off line depicts the rate of the trade-off between the two goods.