A consumer has Rs 50. Good 1 costs Rs 5 and good 2 costs Rs 10 per unit. Which of the following bundles (good 1, good 2) is NOT in her budget set?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (5, 3)
A bundle is in the budget set only if it costs no more than her income: 5x1 + 10x2 ≤ 50.
(2, 4): 10 + 40 = 50, affordable
(5, 3): 25 + 30 = 55, more than 50
(4, 3): 20 + 30 = 50, affordable
(3, 3): 15 + 30 = 45, affordable
Bundles costing the full Rs 50 lie on the budget line and are still in the budget set.
NCERT (2026-27): “2.2.1 Budget Set and Budget Line … Given the prices of the goods and the income of a consumer, she can choose any bundle as long as it costs less than or equal to the income she has. In other words, the consumer can buy any bundle (x1, x2) such that p1x1 + p2x2 ≤ M (2.1) The inequality (2.1) is called the consumer’s budget constraint. The set of bundles available to the consumer is called the budget set. The budget set is thus the collection of all bundles that the consumer can buy with her income at the prevailing market prices.” |