Question: Eric faces a choice between two goods: bananas and apples. Bananas cost $5, apples cost $12, and he has $60 to spend. The graph shows

Eric faces a choice between two goods: bananas and apples. Bananas cost $5, apples cost $12, and he has $60 to spend. The graph shows his original choice at Old Consumption. Old Consumption is the point of tangency between the original budget constraint and indifference curve. The price of apples decreases to $4. The dashed line shows the new budget constraint after it has shifted back to where it is tangent to the old indifference curve. Illustrate the substitution effect of the price change by using point B to point out where Eric's consumption will be as a result of the substitution effect, ignoring the income effect

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