Budget Line
Categories: Accounting, Company Management
Another way that economists turn your regular life into math. A budget line is a way of charting the amount of stuff you can buy with your money.
Basically, you use a regular graph (you know, x and y axes, and all that). The x axis is one product. The y axis is another product. (Say, frozen waffles on x and Snickers bars on y). Then you plot all the combinations of x and y that a person can buy if they use all their money on those items.
So with your monthly food budget, you can buy 252 boxes of frozen waffles and zero Snickers bars. Or zero boxes of frozen waffles and 42 Snickers bars. Or 126 boxes of frozen waffles and 21 Snickers bars. Or all sorts of combinations. The budget line drawn on the graph shows all the possible combinations of those purchases that add up to your budget. From there, you can find your optimal waffle/Snickers balance.
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Finance: What is a Budget?43 Views
Finance a la shmoop what is a budget? that's that thing you throw right out [Woman throws budget out the window]
the window just before you start doing all your Christmas shopping
right but generally it's a plan that lets you see where your money will be
spent if you have a personal budget well you'll be able to decide ahead of time [Personal budget example]
how much money you'll spend on clothes, food, megaphones to annoy and anger your
neighbors and you know whatever floats your boat if you own a company well
you'll probably have much more complicated budget for things like
advertising and lawyer fees either way the plan helps you make sure that you
have enough moolah for everything you need and maybe some leftover for stuff
you want.....Joan wants to control her money so she decides to set up a budget for [Joan setting up a budget on a laptop]
next month she makes a thousand bucks from her summer job and well here's what
her budget looks like.....
Now Joan knows exactly where every penny is gonna go she's not [Joan driving a car]
gonna be caught off guard by any surprise expenses she's not gonna spend
$200 on safecracking equipment and then realize she doesn't have enough left [Joan stood beside a vault of gold bars]
to pay her phone bill although if she does get hit with some unexpected
expenses well hopefully yeah she can just pawn some of those exotic vases she
took from the Peterson place [Joan holding a vase]