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Figure 4.14 The Budget Constraint
The budget constraint demonstrates the options available to a consumer given her income and the prices of the two goods. The horizontal intercept is the quantity of lattes the consumer could afford if she spent all of her income (I) on lattes, I/Plattes. The vertical intercept is the quantity of burritos she could afford if she spent all of her income on burritos, I/Pburritos. Given this, the slope of the budget constraint is the negative of the ratio of the two prices, –Plattes/Pburritos.