Chapter 3
Consumer Behavior 43
a. What happens to Antonio’s budget line Illustrate the change with new books on the vertical axis. In the first year Antonio spends $80 each on 5 new books fora total of $400. For the same amount of money he could have bought 8 used textbooks. His budget line is therefore 80
N 50
U 400, where
N is
the number of new books and U is the number of used books.
After the price change, new books cost $88, used books cost $52.50, and he has an income of $440. If he spends
all of his income on new books, he can still afford to buy 5
new books,
but he can now afford to buy 8.4 used books if he buys only used books. The new budget line is 88
N 52.50
U 440. The line has rotated out to the right and become slightly flatter as shown in the diagram.
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