8 Joe buys two goods, beer and wine, which are substitutes. Also, assume that beer is an inferior good. a. Draw an indifference curve-budget line diagram showing the substitution and income effects of an increase in the price of wine. b. How do you know from your graph that beer and wine are substitutes and that beer is inferior?

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a Indifference Curve Budget Line and Effects of Price Change 1 Indifference Curve An indifference curve IC represents all the combinations of goods be... View the full answer