Question

If your reward increased and your income constraint became $130, explain how you determine the unity maximizing combination of cds and dvds

Answer 1

To determine the utility-maximizing combination of CDs and DVDs when your reward increases and income constraint becomes $130, use the indifference curve approach by analyzing the new budget constraint and finding the point where the indifference curve is tangent to the new constraint.

Step-by-step explanation:

When your reward increases and your income constraint becomes $130, you can determine the utility-maximizing combination of CDs and DVDs using the indifference curve approach. The indifference curve shows the various combinations of CDs and DVDs that give you the same level of satisfaction or utility.

In this case, you would need to analyze the new budget constraint and find the point where the indifference curve is tangent to the new constraint. This point represents the combination that maximizes your utility given the new income constraint.

For example, if Manuel's new utility-maximizing choice after the reward increase and income constraint becomes $130 is seven movies and 32 yogurts, it means Manuel would choose to spend most of the extra income on movies.

Answer 2

Using the same method, we would be able to purchase one more of each, given that DVDs give us the most utility but we would only be able to afford one in this case.