Income and Substitution Effect of a Price Change I/Py E G UL F Do I/Pxo I/PX1 X In the above diagram, initially Px=Pxo, and the consumer is in equilibrium at E. Suppose Px falls from Pxo to PX1. If gg' is the artificial budget line created using Hick's method of decomposition: 1) What is the pure Substitution Effect? (Select one from below.) (1 mark) a) E to F b) F to E F to G d) G to F e) E to G G to E2) What is the Income Effect? (Select one from below.) (1 mark) a) E to F b) F to E C) F to G d) G to F e) E to G f) G to E 3) Are good X and good Y substitutes, or complements and why? (2 marks) 4) Is good X normal, or inferior and why? (2 marks) What about in the diagram below? Again, the consumer is in equilibrium at E and, again, Px falls from Pxoto PX1. I/Py G U1 F F Uo X I/PXO I/PX1 5) In this case, are good X and good Y substitutes or complements, and why? (2 marks) 6) In this case is, good X normal or inferior, and why? (2 marks)