What is the opportunity cost of the second DVD

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Reference no: EM13853596

Sage has $80 to spend this month on CDs and/or DVDs. A CD costs $10 and a DVD costs $20.

a) Draw Sage’s budget constraint (or budget line), with the number of CDs purchased on the vertical axis.

b) What is the opportunity cost of the second DVD?

c) Indicate on your graph the combination point showing Jane consuming 8 CDs and 4 DVDs (label it A). What can you say about this particular point?

d) List three changes that would allow Jane to consume both 6 CDs and 2 DVDs. Show the effect of each on her budget constraint on your graph.

Reference no: EM13853596

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