Answer all questionTHANKS

Question 1 [word limit: 750]~ Suppose that the preferences of a consumer regarding the consumption of goods q, and q2 are represented by function: 0 and faces prices p, and p2 respectively for goods x, and x2.~ a. What is the nature of the goods in the eyes of the consumer? Provide a real world example.~ [10 marks]~ b. Draw a diagram reporting the indifference curves representing the preferences of the consumer and the budget line. Also, derive and describe the demand functions of the consumer for goods q, and q2. Draw the diagram for the demand function of good q1. [20 marks] c. Suppose that p1>2p2. Suppose that p2 decreases. With the use of a diagram, describe how the quantity demanded of q2 changes and decompose the new demand in terms of income and substitution effects. [20 marks]