Figure 21-7
-Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is $10. What is the value of B?
A)40
B)20
C)10

Question

Figure 21-7 
-Refer to Figure 21-7. Suppose a consumer has $200 in income, the price of a book is $5, and the price of a DVD is $10. What is the value of B?
A)40 
B)20 
C)10

Quizplus · Accepted Answer

The budget constraint equation is:
$5B + 10D = 200
Simplifying this equation:
B + 2D = 40
When D = 0, B = 40. When D = 10, B = 20. When D = 20, B = 0.
Thus, the highest value of B occurs when D = 0, which is $40. Therefore, the best choice is to buy 8 books (total cost = $40), since this maximizes the consumer's utility given the budget constraint.

Figure 21-7 -Refer to Figure 21-7. Suppose a Consumer Has $200 in Has