Budget Constraint


Budget Constraint

The goods and services an individual is able to purchase over a given period of time at his/her current income. A budget constraint may be represented on a chart according to the following equation:

Pxx + Pyy = m

Px is how much a good costs;

x is the quantity of that good one purchases;

Py is the price of all other goods and services;

y is the quantity of all other goods; and

m is the amount of money one has allocated for consumption.