Multiple Choice
A change in the price of one good will:
18. Consumer Choice and Behavioral Economics
Budget Constraint
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The Amazing Andy spends all of his $1,200 income on magic tricks. If card tricks cost $50 and wand tricks cost $300, which of the following consumption bundles lies upon Amazing Andy's budget constraint?
A
10 card tricks and 2 wand tricks
B
8 card tricks and 3 wand tricks
C
24 card tricks and 4 wand tricks
D
18 card tricks and 1 wand tricks
Verified step by step guidance1
Identify the total income available to Amazing Andy, which is $1,200.
Determine the cost of each type of trick: card tricks cost $50 each and wand tricks cost $300 each.
Set up the budget constraint equation: $50C + $300W = $1,200, where C is the number of card tricks and W is the number of wand tricks.
Substitute each given consumption bundle into the budget constraint equation to check if it satisfies the equation.
For the bundle 18 card tricks and 1 wand trick, substitute C = 18 and W = 1 into the equation: $50(18) + $300(1) = $1,200, and verify if the equation holds true.
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