Bruno can spend his income on two di Drake CDs and notebooks

Bruno can spend his income on two di Drake CDs and notebooks for his class not of the following three situations, decide eren Bud consumption bundle is within Bruno\'s sumption bundle is within Bruno\'s possibilities. Then decide if t lies on the budget Iine sumption bundle containing 3 CDs and 15 notebooks sumption bundle containing 3 CDs and 10 notebooks sumption bundle containing 2 CDs and 2 notebooks set line not a. CDs cost $10 each, and notebooks cost $2 cadh Bruno has income of $60. He is considering a con- Bruno has income of $110. He is considering a con Bruno has income of $50. He is considering a con- b, CDs cost $10 each, and notebooks cost $5 each c. CDs cost $20 each, and notebooks cost $10 each

Solution

a) Budget equation: 10C + 2N = 60

where C = CDs

N = Notebooks

If he is buying 3 CDs and 15 notebooks, he is spending 10(3) + 2(15) = 60

He will be exactly on the budget line as he is spending equal o his income.

b) Budget equation: 10C + 5N

In buying 3 CDs and 10 notebooks, he is spending 10(3) + 5(10) = 80

His income is $110, so he is spending less than his income. Thus this consumption bundle will lie inside the budget line.

c) Budget line equation: 20C + 10N = 50

His consumption bundle of 2CDs and 2 notebooks will cost him: 20(2) + 10(2) = $60

His income is $50, so this consumption costs him more than his income. Thus this consumption bundle will lie outside the budget line.