-Olivia's income is $216 a year and she spends all of it on music CDs and movies on DVDs. The price of a music CD is $18 and the price of a DVD is $18. The figure above illustrates Olivia's preferences.
a) What quantities of CDs and DVDs does Olivia buy? Explain your solution.
b) What is Olivia's marginal rate of substitution at the point at which she consumes? Explain.

Question

Quizplus · Accepted Answer

The Answer of 
-Olivia's income is $216 a year and she spends all of it on music CDs and movies on DVDs. The price of a music CD is $18 and the price of a DVD is $18. The figure above illustrates Olivia's preferences.
a) What quantities of CDs and DVDs does Olivia buy? Explain your solution.
b) What is Olivia's marginal rate of substitution at the point at which she consumes? Explain.

-Olivia's Income Is $216 a Year and She Spends All