How to read this

The grey area is what the consumer can choose: bundles that are technically feasible (in ) and affordable. An income (B1) and an endowment sold at market prices (B2) can give the same set, but a price change works differently.

  • Move (the blue line): under (B1) the line turns about the point where all money goes on good 2, under (B2) about , which stays affordable.
  • Try Two-part tariff and Whole units of good 2: the set is no longer convex.
  • Click the plot to test a bundle.

Where the budget comes from

Prices

Technically feasible set X

A set of budget-feasible choices

Numbers