George has a weekly income (I) of $50, which he uses to purchase doughnuts (D) and coffee (C). If the price of a doughnut is $1 and the price of coffee is $2.50, his budget constraint can be expressed as:
A) D = 50 + 2.50C.
B) D = 50 - 25C.
C) D = 50 - 0.25C.
D) D = 50 - 2.50C.

Question

Quizplus · Accepted Answer

George's budget constraint is determined by the equation I = P_D * D + P_C * C, where P_D is the price of doughnuts and P_C is the price of coffee. Substituting the given values, 50 = 1*D + 2.50*C, rearranging gives D = 50 - 2.50C.

George Has a Weekly Income (I) of $50, Which He