Problem
Angela has a monthly income of $120, which she spends on MP3s and a composite good (whose price you may assume is $1 throughout this problem). Currently, she does not belong to an MP3 club, so she pays the retail price of an MP3 of $2; her optimal basket includes 20 MP3s monthly. For the past several months Asteroid, a media company, has offered her the chance to join their "Premium Club"; to join the club she would need to pay a membership fee of $60 per month, but then she could buy all the MP3s she wants at a price of $0.50. She has decided not to join the club. Asteroid has now introduced an "Economy Club"; to join, Angela would need to pay a membership fee of $30 per month, but then she could buy all the MP3s she wants at a price of $1. Draw a graph illustrating (1) Angela's budget line and optimal basket when she joins no club, (2) the budget line she would have faced had she joined the Premium Club, and (3) her budget line if she joins the Economy Club. Will Angela surely want to join the Economy Club? If she were to join the club, how many MP3s per month might she buy? Show how you arrive at your answers using a revealed preference argument
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.