Suppose you have $100 to spend on two goods: $20 for DVDs or $10 for books. Which combination of the two goods is NOT on the budget line?
A) eight books, one DVD
B) four books, three DVDs
C) seven books, three DVDs
D) two books, four DVDs

Question

Quizplus · Accepted Answer

The budget line represents all the combinations of goods a consumer can purchase with a given budget, given the prices of the goods. To be on the budget line, the total cost of DVDs and books must equal $100. For choice C, seven books at $10 each is $70, and three DVDs at $20 each is $60, totaling $130, which exceeds the $100 budget.

Suppose You Have $100 to Spend on Two Goods: $20