-Rick's income is $54 a week and he spends all of it on CDs and sandwiches. The price of a CD is $18 and the price of a sandwich is $3. The figure above illustrates Rick's preferences. If the price of a CD falls to $6, Rick's consumption of CDs will increase by
A) 1 CD per week.
B) 2 CDs per week.
C) 3 CDs per week.
D) 4 CDs per week.

Question

-Rick's income is $54 a week and he spends all of it on CDs and sandwiches. The price of a CD is $18 and the price of a sandwich is $3. The figure above illustrates Rick's preferences. If the price of a CD falls to $6, Rick's consumption of CDs will increase by
A) 1 CD per week. 
B) 2 CDs per week. 
C) 3 CDs per week. 
D) 4 CDs per week.

Quizplus · Accepted Answer

Initially, Rick can buy 3 CDs ($54/$18) or 18 sandwiches ($54/$3). If the price of a CD falls to $6, he can buy 9 CDs ($54/$6). The increase in CDs is 9 - 3 = 6 CDs. However, considering the budget constraint and preferences, the increase is 3 CDs per week.

-Rick's Income Is $54 a Week and He Spends All