A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?
A)$4
B)$8
C)$12
D)$20

Question

Quizplus · Accepted Answer

Given that the consumer spends twice as much on CDs as on DVDs and has a total income of $120, let's denote the price of a CD as P_CD and the price of a DVD as P_DVD. The total expenditure on CDs is 2 times the total expenditure on DVDs, and the total income is the sum of these expenditures. With 10 CDs and 2 DVDs, the equation can be set up as 10P_CD + 2P_DVD = $120, and 10P_CD = 2(2P_DVD). Solving these equations with the given information, we find that P_CD = $8.

A Consumer Is Currently Spending All of Her Available Income