The “Good 1 - Good 2” Choice Space

We can use the tools of economics to analyze a wide variety of choices, from how much of a good to buy to where to work.

In the particular case of bundles of two goods, every option can be represented by a point in a Cartesian plane, with the quantity of good 1 on the horizontal axis, and the quantity of good 2 on the vertical axis. We will call this diagram good 1 - good 2 space. The diagram below shows the general representation of two bundles in good 1 - good 2 space; move the bundles around to solidify your understanding.

As a shorthand, we will sometimes write “good 1 - good 2 space” as $\mathbb R_{+}^2$; that is, the set of all vectors $(x_1,x_2)$ such that $x_1 \ge 0$ and $x_2 \ge 0$. We don’t allow ourselves to think of negative quantities of goods: you can’t consume $-3$ apples!