How does a consumer's budget set differ from his budget constraint? For a consumer with a given level of income, will the budget set have more combinations of goods or will the number of combinations be higher for the budget constraint?
What will be an ideal response?
The budget set is the set of all possible bundles of goods and services that a consumer can purchase with his income, irrespective of whether the entire income is used. The budget constraint represents only those bundles that exhaust the consumer's income. Therefore, the budget set has more consumption bundles than the budget constraint.
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