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( points) 4. A consumer spends her income on CDs (good x) and a composite of other goods (good y). CDs cost $20 per unit

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( points) 4. A consumer spends her income on CDs (good x) and a composite of other goods (good y). CDs cost $20 per unit and the consumer's income is $300. (5 points each) a. Draw the consumer's budget constraint and show the optimum for a consumer who buys a positive amount of both good y and CDs. Let the quantities of CDs and good y be x and y respectively. b. Now assume that a CD club offers her the following deal. For a membership fee of $100, she can buy all the CDs she wants for $10 each. Draw the new budget constraint under this offer. c. Under the offer, show that anyone buying more than 10 CDs before the plan is introduced will join the club, but anyone buying fewer than 10 CDs may or may not join the club. d. Draw an indifference curve diagram showing that if an individual is indifferent between joining and not joining the club, then she would spend more money on CDs and purchase more CDs if she joins the club

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