a. If Najib changes the quantities that he buys, will he buy more or fewer bottles of
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a. If Najib changes the quantities that he buys, will he buy more or fewer bottles of sparkling water and more or fewer bags of jellybeans? Explain your answer.
b. When the prices change, will there be an income effect, a substitution effect, or both at work? Explain your answer.
Najib has made his best affordable choice of sparkling water and jellybeans. He spends all of his income on five bottles of sparkling water at $2 each and 10 bags of jellybeans at $4 each. Now the price of sparkling water rises to $2.50 a bottle and the price of jellybeans drops to $3.75 a bag.
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