The isocost line and the budget line are very similar.

The **Isocost line **represents all the different costs which could arise from using different combinations of inputs. For example, suppose that apples can be produced on a farm using tractors and workers. Suppose that the wage (w) is $2 and that the rental rate of capital (r) $1. Now suppose that the total costs you were willing to pay was $10. The isocost line would be all the different combinations of tractors and workers that you could employ for $10. So you could have the following combinations:

- 5 workers, 0 tractors = 5 *$2 = $10
- 4 workers, 2 tractors = 4*$2 + 2*$1 = $10
- 3 workers, 4 tractors = 3*$2 + 4*$1 = $10
- 2 workers, 6 tractors = 2*$2 + 6*$1 = $10
- 1 worker, 8 tractors = 1 * $2 + 8*$1 = $10
- 0 workers, 10 tractors = 10*$1 = $10

The **budget constraint **represents all the different combinations of goods that you could purchase with a fixed income. Suppose that chocolate was $1 and apples were $1 and you had an income of $3. The budget constraint would be the graph of all the following possibilities:

- 3 chocolates, 0 apples = 3*$1 = $3
- 2 chocolates, 1 apple = 2*$1 + 1*$1 = $3
- 1 chocolate, 2 apples = 1*$1 + 2*$1 = $3
- 0 chocolates, 3 apples = 3*$1 = $3