1.Consider Karen who consumes chips (C) and salsa (S). Both are normal goods and these goods are complements- that is, if the price of one decreases we observe that the quantity demanded of the other good decreases.

a.Suppose the price of chips increases. What are the signs of the substitution effect, income

effect, and total effect of this change on the quantity demanded of C and S? For each effect briefly state your reasoning. (6 points)

b. Depict the effect of this price change on Karen's demand curve for salsa (2 points)

Goods Effect Direction (+/-) Why? Substitution Effect Chips Income Effect Total Effect Substitution Effect Salsa Income Effect Total Effect