If he spends all his income in cold drink, he can purchase at most 15 bottles of cold drink (point B in figure 7.11). If he spends his entire income in sandwiches, he can buy 10 pieces of sandwiches (point A in figure 7.11).

If he desires, he can also distribute his income on both the goods and purchase different combinations of quantities of cold drink and sandwiches. Points C and D represent this possibility. A line joining points A, B, C and D is the budget line of Mr. X.

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Thus, a budget line of a consumer can be defined as a line that connects the points showing all the possible combinations of goods and services that can be purchased with his budget at the prevailing market prices.

In diagram 7.11, AB is the budget line of Mr. X. Point A represents a situation where Mr. X spends all his income to buy 10 pieces of sandwiches. Similarly, point B represents a situation where Mr. X spends all his income to buy 15 bottles of cold drink. All intermediate points (like C, D etc.) show different combinations of both the goods that he can buy, with his earning, at the prevailing market prices.