Antonio buys five new college textbooks during his first year at school at a cost of $80 each. Used books cost only $50 each. When the bookstore announces that there will be a 10% increase in the price of new books and a 5% increase in the price of used books, Antonio’s father offers him $40 extra.
a. What happens to Antonio’s budget line? Illustrate the change with new books on the vertical axis.
b. Is Antonio worse or better off after the price change? Explain.