1. Suppose there are two goods, that the prices are given, and that there is a consumer worth a certain income. Show in a diagram how it is possible to split the effects of a price fall on good 1 into the income and substitution effects. Assume that the good is a normal good.
2. Explain briefly what utility maximization is.
3. What is the condition for utility maximization?
4. Explain intuitively the mathematical condition in number.