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Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads (MD) and streamed movies (SM). Each music download costs $1 and each streamed movie costs $5.
-(Scenario: Music Downloads and Streamed Movies) Read the scenario Music Downloads and Streamed Movies. The slope of Phillip's budget line is equal to:
A) -0.2.
B) -5.
C) -0.4.
D) -2.5.

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Quizplus · Accepted Answer

The slope of the budget line is the negative of the price ratio of the two goods. Here, the price of music downloads is $1 and the price of streamed movies is $5, so the slope is -1/5 = -0.2.

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