From which of the following, consumers can choose their consumption bundle?

Option 1 -> Budget Line represents only the boundary showing combinations where entire income is spent.

Option 2 -> Budget Set includes all affordable combinations of goods within the consumer's income constraint.

Option 3 -> Indifference Curve represents preference combinations giving equal satisfaction, not affordability.

Option 4 -> Marginal Rate of Substitution is a concept measuring willingness to substitute goods, not a choice set.

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Hence, Budget Set -> The budget set contains all possible consumption bundles that a consumer can afford given their income and market prices. It includes all combinations on and below the budget line (P1×X1 + P2×X2 ≤ M, where M is income). While the budget line shows only the boundary, the budget set encompasses the entire feasible region from which consumers make their actual choices. The optimal choice is then determined where the highest attainable indifference curve is tangent to the budget line within this budget set. -> correct