Figure 21-6
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?
A)$1
B)$2
C)$5
D)$100

Question

Figure 21-6 
-Refer to Figure 21-6. Suppose a consumer has $100 in income, the price of popcorn is $2, and the value of B is 100. What is the price of Mt. Dew?
A)$1 
B)$2 
C)$5 
D)$100

Quizplus · Accepted Answer

The budget line is given by:$$I = P_x * X + P_y * Y$$where:* I is income* P_x is the price of popcorn* X is the quantity of popcorn* P_y is the price of Mt. Dew* Y is the quantity of Mt. DewSubstituting the given values into the budget line, we get:$$100 = 2 * X + P_y * Y$$Since the value of B is 100, we know that the consumer is indifferent between consuming 50 units of popcorn and 100 units of Mt. Dew. Therefore, we can substitute these values into the budget line to solve for P_y:$$100 = 2 * 50 + P_y * 100$$$$100 = 100 + 100 * P_y$$$$P_y = 1$$Therefore, the price of Mt. Dew is $1.

Figure 21-6 -Refer to Figure 21-6. Suppose a Consumer Has $100 in Has