5.32. Julie buys food and other goods. She has an income of $400 per month. The price of food is initially

$1.00 per unit. It then rises to $1.20 per unit. The prices of other goods do not change. To help Julie out, her mother offers to send her a check each month to supplement her income. Julie tells her mother, “Thanks, Mom.

If you would send me a check for $50 per month, I would be exactly as happy paying $1.20 per unit as I would have been paying $1.00 per unit and not receiving the $50 from you.” Which of the following statements is true?

Explain.

The increased price of food has:

a) an income effect of "$50 per month

b) an income effect of #$50 per month