Total expenditure is Px x X + Py x Y.
M is the consumer's income or budget. The consumer cannot spend more than her budget allows. Px x X + Py x Y <= M is the consumer's budget constraint.
To draw a budget constraint, a line that shows the maximum amount of goods a buyer can purchase with her available funds, you need to know two things: 1) how much money she has, and 2) the prices of the two goods being considered.
Assume a consumer has an income of $24. The two goods are rice (price: $2) and beans (price: $3).
This is the basic budget line. Its slope is an indication of relative prices ($2/$3).
This is when the price of rice decreases and the consumer can purchase more rice.
When income doubles, the line will shifts outward, parallel to the original constraint.
Similarly, a company's production opportunity set represents the greatest quantity of one product that a company can produce for any given amount of the other good it produces. The investment opportunity set represents the highest return an investor can expect for any given amount of risk undertaken.
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