Dave has $300 to spend each month on DVDs and CDs. DVDs and CDs both currently have
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Dave has $300 to spend each month on DVDs and CDs. DVDs and CDs both currently have a price of $10, and Dave is maximizing his utility by buying 20 DVDs and 10 CDs. Suppose Dave still has $300 to spend, but the price of a DVD rises to $12, while the price of a CD drops to $6. Is Dave better or worse off than he was before the price change? Use a budget constraint- indifference curve graph to illustrate your answer.
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First draw the budget constraint indifference curve and point of optimal consumption for the ...View the full answer
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