Asked by Jayleen Bocanegra on Jun 24, 2024
Verified
A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?
A) $4
B) $8
C) $12
D) $20
Music CDs
Compact discs used to store music recordings, a physical format for retailing music content.
DVDs
Digital Versatile Discs, a type of optical storage media used for storing data, including movies, software, and other information.
Consumption Bundle
A collection of goods and services consumed by an individual or household.
- Figure out the quantity of goods that can be afforded by a consumer given their monetary limitations and the prices of the goods.
- Identify the economic rationale behind consumer's choice of consumption bundles.
Verified Answer
HN
Huzaif NaeemJul 01, 2024
Final Answer :
B
Explanation :
Given that the consumer spends twice as much on CDs as on DVDs and has a total income of $120, let's denote the price of a CD as P_CD and the price of a DVD as P_DVD. The total expenditure on CDs is 2 times the total expenditure on DVDs, and the total income is the sum of these expenditures. With 10 CDs and 2 DVDs, the equation can be set up as 10P_CD + 2P_DVD = $120, and 10P_CD = 2(2P_DVD). Solving these equations with the given information, we find that P_CD = $8.
Learning Objectives
- Figure out the quantity of goods that can be afforded by a consumer given their monetary limitations and the prices of the goods.
- Identify the economic rationale behind consumer's choice of consumption bundles.