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Solve the question in detail, well-labelled diagram Question 1 Suppose that there are two goods, X and Y, with prices P; :> 0 and Py

Solve the question in detail, well-labelled diagram

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Question 1 Suppose that there are two goods, X and Y, with prices P; :> 0 and Py > C! and a consumer with income MD, who has hammock-shaped indifference curves and consumes both goods in positive quantities. Suppose that there is s decrease in the price of X. (a) Using plain language, provide an answer to the following questions: Will the consumer he better-off or worse-off in response to this change? If we want the consumer to have the same change in welfare, but instead of obtaining it with a decrease in the price of X, we change her income, should we increase or decrease her income? (b) Provide a graphical representation of the equivalent variation of the decrease in the price of X in our typical two-dimensional graph representing consumption bundles [with X in the horizontal axis and Y in the vertical axis)

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