Asked by Conor Keehley on May 31, 2024
Verified
Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint?
A) −5.0
B) −2.5
C) −0.4
D) The slope of the budget constraint cannot be determined without knowing the income the consumer has available to spend on the two goods.
CDs
Certificates of Deposit, a type of financial product provided by banks that offer a fixed interest rate in exchange for keeping a deposit untouched for a predetermined period.
DVDs
DVDs are digital versatile discs used to store large amounts of data, including movies and software.
Budget Constraint
An economic model that represents all the combinations of goods and services that a consumer can afford given current prices and their income.
- Analyze and calculate the effects of price changes on the budget line and consumer choices.
Verified Answer
Learning Objectives
- Analyze and calculate the effects of price changes on the budget line and consumer choices.
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