Many Goods
While low level demonstrations of budget constraints are often limited to two good situations which provide easy graphical representation, it is possible to demonstrate the relationship between multiple goods through a budget constraint.
In such a case, assuming there are goods, called for, that the price of good is denoted by, and if is the total amount that may be spent, then the budget constraint is:
Further, if the consumer spends his income entirely, the budget constraint binds:
In this case, the consumer cannot obtain an additional unit of good without giving up some other good. For example, he could purchase an additional unit of good by giving up units of good
Read more about this topic: Budget Constraint
Famous quotes containing the word goods:
“But then in what way are things called good? They do not seem to be like the things that only chance to have the same name. Are goods one then by being derived from one good or by all contributing to one good, or are they rather one by analogy? Certainly as sight is in the body, so is reason in the soul, and so on in other cases.”
—Aristotle (384–322 B.C.)
“The technological landscape of the present day has enfranchised its own electorates—the inhabitants of marketing zones in the consumer goods society, television audiences and news magazine readerships... vote with money at the cash counter rather than with the ballot paper at the polling booth.”
—J.G. (James Graham)