Budget
Definition
The amount of money available to spend on goods and services.
Analogy
Think of your budget as a pizza. You have a fixed number of slices (dollars) that you can allocate towards different toppings (goods and services). You need to make sure you don't exceed the total number of slices (money) available or else you'll run out and can't buy anything else.
Related terms
Marginal Cost: The additional cost incurred when consuming one more unit of a good or service.
Opportunity Cost: The value of the next best alternative that must be given up in order to choose one option over another.
Disposable Income: The amount of money left after taxes have been deducted from income, which is available for spending or saving.
"Budget" appears in:
Practice Questions (4)
If the budget given to Emily for clothing is $60, and the MU/P of a shirt is 8 and the MU/P of a pair of jeans is 6, what combination of shirts and jeans should Emily purchase to maximize her utility?
If Maria has a budget of $30 to spend on books and pens, and the MU/P of a book is 5 and the MU/P of a pen is 3, what combination of books and pens should Maria purchase to maximize her utility?
If Mark has a budget of $50 to spend on pizzas and burgers, and the MU/P of a pizza is 10 and the MU/P of a burger is 8, what combination of pizzas and burgers should Mark purchase to maximize his utility?
Jennifer has a budget of $40 to spend on skirts and blouses. The MU/P of a skirt is 7 and the MU/P of a blouse is 5. What combination of skirts and blouses should Jennifer purchase to maximize her utility?
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