Exhibit 6-30
-Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of books?
A) $1
B) $5
C) $10
D) $60
E) unable to determine

Question

Exhibit 6-30 
-Consider Exhibit 6-30. Assume that you have $600 to spend on books and compact disks. What is the current price of books?
A) $1 
B) $5 
C) $10 
D) $60 
E) unable to determine

Quizplus · Accepted Answer

The slope of the budget constraint is -1, which means that for every dollar spent on books, one less dollar can be spent on compact disks. The y-intercept is 60, which means that if no money is spent on books, $60 can be spent on compact disks. Therefore, the equation of the budget constraint is: 
Compact disks = 60 - Books
If you have $600 to spend, then you can spend: 
Compact disks + Books = $600
Substitute the budget constraint equation into the equation above to solve for Books: 
(60 - Books) + Books = $600 
Solve for Books: 
Books = $10 
Therefore, the current price of books is $10.

Exhibit 6-30 -Consider Exhibit 6-30. Assume That You Have $600 to Spend