At the start, Matthew is in equilibrium with an income of $300, facing commodity prices $4 for Good X and $10 for Good Y. Suppose, then, that the price of Good X falls to $2.50 and the price of Good Y remains the same; nothing happens to his income.

Calculate the change in quantity demanded of Good X after the price of Good X falls to $2.50.

After the price change, and solely because of the income effect, would you say that the demand for Good X will change, stay the same, or would you rather say there is not enough information to determine whether the demand for Good X changes or stays the same? If there is a change in demand brought about by the income effect, by how much and in what direction (i.e., an increase or a decrease)

fter the price change, and solely because of the substitution effect, would you say that the demand for Good X will change, stay the same, or would you rather say that there is not enough information to determine whether the demand for Good X changes or stays the same? If there is a change brought about by the substitution effect, by how much and in what direction (i.e., an increase or a decrease)?