Assume that a person consumes two goods,coffee and candy bars.Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of coffee decreases.Carefully label all curves and axes.What will happen to consumption if coffee is a normal good
What will happen to consumption if coffee is an inferior good
(Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

Question

Assume that a person consumes two goods,coffee and candy bars.Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of coffee decreases.Carefully label all curves and axes.What will happen to consumption if coffee is a normal good
 What will happen to consumption if coffee is an inferior good
 (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

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The Answer of Assume that a person consumes two goods,coffee and candy bars.Use a graph to demonstrate how the consumer adjusts his/her optimal consumption bundle when the price of coffee decreases.Carefully label all curves and axes.What will happen to consumption if coffee is a normal good
 What will happen to consumption if coffee is an inferior good
 (Remember to explain the possible change when the income effect dominates and when the substitution effect dominates.)

Assume That a Person Consumes Two Goods,coffee and Candy Bars