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:
“Sir: Between buccaneers, no ceremony; I take your dry goods, and in return I send you pimento; therefore, we are now even. I entertain no resentment.... Nothing can intimidate us; we run the same fortune, and our maxim is that the goods of this world belong to the strong and valiant.”
—For the State of Florida, U.S. public relief program (1935-1943)
“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.)