Ming has a budget of $60/month to spend on high-tech at-home entertainment. There are only two goods that he considers: CDs and video rentals. For each of the situations described below, draw Mings budget constraint. Denote the axes as CDs per month and video rentals per month. Label the x and y intercepts of the budget constraints, the slopes, and any kink points (that is, give the quantities associated with the intercepts, slopes, and kinks.)
A) CDs cost $12 each and video rentals are $4 each. (This is a standard budget constraint.)
B) Video-rentals cost $4 each. CDs cost $12 each for the first three; however, if more than three CDs are purchased, the price for additional CDs (that is, for the fourth, fifth, etc. CD) drops to $8.
C) Video rentals cost $4 each. The price of CDs is $12 for up to three CDs but drops to $10 per CD if more than three are purchased.
D) Video rentals cost $4 each. CDs can be bought for $12 each or in groups of three for $30 for the three.
E) CDs cost $12 each and video rentals are $4 each. However, for $24 Ming can purchase a video card that allows him to rent 10 videos in a month; for more than 10 videos, the cost returns to $4 each. He is allowed to purchase only one of these cards per month.
F) As in part 5, but now Ming is allowed to purchase as many of these cards as he would like each month (but he must use the cards entirely on each month.)
