Problem: Yangjie buys smoothies and sushi, The price of a smoothie is 5$ and the price of sushi is 1$ a piece. Each month, Yangjie spends all of her income and buys 10 smoothies and 20 pieces of sushi. Next month the price of a smoothie will fall to 3$ and the price of sushi will rise to 2$ a piece. Assume that Yagjie's preference map is similar to that in Fig. 8.3 (b). Use a graph to answer the following:
Q1. Will Yangjie be able to buy 10 smoothies and 20 pieces of sushi next month?
Q2. Will she want to buy 10 smoothies and 20 pieces of sushi, explain why
Q3. Which situation does she prefer: smoothies at 5$ each and sushi at 1 $ a piece or smoothies at 3$ each and sushi at 2$ a piece?
Q4. If she changes the quantity that she buys, which good will she buy more of and which will she buy less
Q5. When the prices change next month will there be an income effect and a substitution effect at work or just one of them? Explain.