Gina lives in Chicago and very much enjoys traveling by air to see her mother in Italy. On the graph below, x denotes her number of round trips to Italy each year. The composite good y measures her annual consumption of other goods; the price of the composite good is py, which is constant in this problem. Several indifference curves from her preference map are drawn below, with levels of utility U1 a) Make a copy of the graph below, and use it to determine the income and substitution effects on the number of round trips Gina makes as the price of a round trip increases from $1000 to $3000. Clearly label these effects on the graph.
b) Using the graph, estimate the numerical size of the compensating variation associated with the price increase? You may refer to the graph to explain your answer.
c) Will the consumer surplus measured using Gina's demand for air travel to Italy provide an exact measure of the monetary value she associates with the price increase? In a sentence explain why or why not.

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