Now suppose that your grandmother gives you six CDs for Christmas. This means that you can now afford units of clothing and six CDs without spending any money on CDs, and you can have a total of CDs if you don't spend any money on clothing. Assume that you cannot return or immediately sell the six CDs your grandmother has given you. However, you are free to throw them in the trash at no cost if you decide that you do not want them. On the following graph, use the blue points (circle symbol) to draw your budget constraint under these conditions. Then use the purple quadrilateral (diamond symbols) to shade in the area that represents all possible consumption bundles you can consume, given your budget constraint with the gift. Lastly, indicate the optimal consumption bundle by using the black point (X symbol). (Hint: The budget constraint will be made up of two line segments.)

Now suppose that your grandmother gives you six CDs for Christmas. This means that you can now afford units of clothing and six CDs without spending any money on CDs, and you can have a total of CDs if you don't spend any money on clothing. Assume that you cannot return or immediately sell the six CDs your grandmother has given you. However, you are free to throw them in the trash at no cost if you decide that you do not want them. On the following graph, use the blue points (circle symbol) to draw your budget constraint under these conditions. Then use the purple quadrilateral (diamond symbols) to shade in the area that represents all possible consumption bundles you can consume, given your budget constraint with the gift. Lastly, indicate the optimal consumption bundle by using the black point (X symbol). (Hint: The budget constraint will be made up of two line segments.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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