Consider the diagram at right, which illustrates Gaston€™s preferences for red beans and rice. Gaston has an income of $20. Rice costs $2 per serving.

a. Derive Gaston€™s demand for red beans. Use prices of $2 and $4 in your analysis. Graph your results, and connect the points you plotted to yield Gaston€™s demand for red beans.
b. Suppose that the price of rice increases to $3. Again, derive Gaston€™s demand for red beans using the same prices you used in part (a).
c. Does Gaston€™s demand for red beans increase or decrease as a result of the increase in the price of rice?
d. Does your answer to (c) indicate that red beans and rice are substitutes or complements?

Rice 10-T 6- U2 , 0 1 2 3 4 5 6 7 8 9 10 Red beans