Figure 6.7
-Refer to Figure 6.7.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

Question

Figure 6.7 -Refer to Figure 6.7.Consider the budget constraint BC₁.If the price of DVDs is $20 and the price of CDs is $10, what is the consumer's income?

Quizplus · Accepted Answer

The consumer's income is determined by the total cost of the bundle of goods they can afford given their budget constraint. Since the budget line intersects the axes at points representing the maximum quantity of DVDs (12) and CDs (24) that can be purchased, we calculate income by considering the cost of purchasing the maximum of one good while purchasing none of the other. Thus, for DVDs: 12 DVDs * $20/DVD = $240, or for CDs: 24 CDs * $10/CD = $240. Either calculation shows the consumer's income is $240.

Figure 6.7 -Refer to Figure 6.7.Consider the Budget Constraint BC1.If the Price

Figure 6.7 -Refer to Figure 6.7.Consider the Budget Constraint BC₁.If the Price