The price of DVDs (D) is $20.00 and the price of CDs (C) is $20.00. Phillip has a budget of $100.00 to spend on the two goods. Suppose that he has already bought 1 DVD and 1 CD. In addition, there are 3 more DVDs and 3 more CDs that he would really like to buy.

1. Using the line drawing tool, given the above prices and income, draw her budget line. Label this line 'L'.
2. Using the point drawing tool, and considering what Katrina has already purchased and what she still wants to purchase, identify the three different bundles of CDs and DVDs that she could choose.

Point A, and B are the bundles available for Katrina to buy on this budget. Since she has already bought one unit of each she only has $60 left to spend. With these $60 she could either choose to buy 3 DVDs or 3 CDs or she could choose from point A and B. L represents budget line and point A and B represent bundles.

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topeadeniran2 topeadeniran2 · Answer 2 · 2022-01-25T22:11:51+01:00

Based on the information given regarding the budget line, it should be noted that the consumer has spent $30 from the total income of $100.

Budget line.

The budget line simply refers to a graphical representation of the possible combinations of two goods that one can buy given an income.

In this case, the person has already bought 1 CD and 1 DVD. It implies that $30 was already deducted from the $100. The consumer will be left will be $70 and the price of CD is $10 per unit. The graphical representation is also illustrated.

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