Problem
Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitution of food for clothing. Let x denote the amount of food consumed and y the amount of clothing. Suppose the price of food increases from to On a clearly labeled graph, illustrate the income and substitution effects of the price change on the consumption of food. Do so for each of the following cases:
a) Case 1: Food is a normal good.
b) Case 2: The income elasticity of demand for food is zero.
c) Case 3: Food is an inferior good, but not a Giffen good.
d) Case 4: Food is a Giffen good.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.