Danny likes to buy books (x₁), and music (x₂) with his monthly allowance. Suppose that books cost $10 each and music downloads cost $2 each, and Danny has $50 from his allowance to spend this month.

a) (2) Write down the equation of Danny’s budget constraint. Draw Danny's budget line.

b) (4) Suppose that additionally Danny’s Mom says that she will buy him 5 books every month. Show how the new budget line (with the gift of 5 books) will look like.

c) (4) If Danny is able to buy the first 5 books at regular price, all additional books are half price, draw Danny’s new budget line.

Make sure the intercepts and slopes are indicated on the budget lines.

Answer rating: 100% (QA)

Books X1 cost 10 Music X2 cost 2 Total allowance 50 a Danny budge... View the full answer