Your budget is $100 and you are spending it on pens and candy.

The price of both goods is $2.

a) Draw your budget line, with pens on the X axis.

b) When you are maximizing your utility, you are buying 30 pens. Show this bundle on your graph, along with its corresponding indifference curve.

c) Assume that the price of pens drops to $1, but your optimal choice is to continue buying just 30 pens. Draw the new budget line and show your new optimal bundle on it.

d) Carefully add all necessary elements on your graph to show the income and the substitution effects of this change in price on your consumption of pens.

e) What do you notice about the income and the substitution effects in this case?

f) Based on your graph, are pens a normal good, or an inferior good?