## What is difference between isocost line and budget line

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