Suppose Jane Has $100 to Spend on Either Compact Disks,which

question 13

Essay

Suppose Jane has $100 to spend on either compact disks,which cost $10 each,or hamburgers,which cost $2 each.
(A)Graph Jane's budget line for compact disks and hamburgers.
(B)What is the maximum quantity of compact disks and hamburgers that Jane can buy with $100?
(C)Show what happens to the budget line if the price of compact disks falls from $10 to $5.What is the maximum amount of compact disks that Jane can purchase now? Show the optimal quantities of compact disks and hamburgers Jane would consume now,assuming that compact disks are normal goods.
(D)Suppose Jane has $150 to spend rather than $100.Draw one diagram where compact disks are normal goods and one where compact disks are inferior goods.

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