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An opportunity set contains the combinations available within a constraint.
An opportunity set describes the combinations a person can afford with a given budget and prices. It shows the feasible choices before asking which one the person prefers. A change in income or a price can change that set.
Separating feasibility from preference prevents a common mistake: assuming a choice reveals only what someone likes. It also reflects the options they could reach. Economic models simplify this situation so the trade-offs can be examined clearly.
With a budget of 20 units, a book costing 10 and a ticket costing 5, you could afford two books, four tickets, or one book and two tickets.
The example assumes whole items and only two purchases; actual choices have additional constraints.
Principles of Economics 3e — Indifference Curves
OpenStax contributors · OpenStax, Rice University
CC BY 4.0. Rewritten as a self-contained explanation; the example and reflection are Vakataka additions. No source images reproduced.
Source edition: 2024-07-18T12:52:27Z
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