The budget line shows all the different combinations of the two commodities that a consumer can purchase, given his money income and the price of two commodities.
The equation of a budget line is given by:
M = PX.QX + PY.QY.
Where, M = Money income of the consumer; PX = Price of Good-X; PY = Price of Good-Y; QX = Quantity of Good-X; QY = Quantity of Good-Y.
Supposing a consumer has an income of Rs 40 to be spent on apples and oranges. Price of an orange is Rs 5 and an apple is Rs 10. With his given income and given prices of apples and oranges, the different combinations that a consumer can get of these two goods are shown in the following table:
A consumer can purchase any of the above combinations in accordance with the budget line equation.