Question

3. Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease?

a. Your budget increases from $100 to $150 while the prices stay the same.
b. Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20.
c. Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15.

Answer 1

Suppose that you initially have $100 to spend on books or movie tickets.

The books start off costing $25 each and the movie tickets start off costing $10 each.

a. Your budget increases from $100 to $150 while the prices stay the same.

Increase

b. Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20.

Decrease

c. Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15.

Increase