Irene has income $1,800 and utility U = XY pays PX= $45 and PY= $30.

a. Provide a fully labelled indifference curve diagram and supplemental calculations to illustrate the income and substitution effects associated with the introduction of a $25 per unit subsidy on Good X.

b. Making reference to your diagram, explain how you can infer that she thinks that Good X is a normal good