Reference: Ref 23-4 (Figure: Budget Constraint) Refer to the figure. A consumer has $45 to spend on movie and music downloads per month. What is the price per movie and music download?
A) $15 per movie download and $0.45 per music download
B) $3 per movie download and $1 per music download
C) $2.50 per movie download and $1.50 per music download
D) $10 per movie download and $0.80 per music download

Question

Reference: Ref 23-4 (Figure: Budget Constraint) Refer to the figure. A consumer has $45 to spend on movie and music downloads per month. What is the price per movie and music download?
A) $15 per movie download and $0.45 per music download 
B) $3 per movie download and $1 per music download 
C) $2.50 per movie download and $1.50 per music download 
D) $10 per movie download and $0.80 per music download

Quizplus · Accepted Answer

The slope of the budget constraint represents the opportunity cost of one good in terms of the other. In this case, the slope is -3, indicating that for every three music downloads the consumer purchases, they forgo one movie download. Therefore, the price of a movie download must be three times the price of a music download. Solving the system of equations where $x$ is the price of a music download and $y$ is the price of a movie download:

3x + y = 45 
y = 3x

Substituting y:

3x + 3x = 45

6x = 45

x = 7.5

Therefore, the price of a music download is $1 and the price of a movie download is $3. The answer is B.

Reference: Ref 23-4 (Figure: Budget Constraint) Refer to the Figure