Question: Question 5 (20 points) Decompose the total effect of a price increase in x, into income and substitution effects. Assume x, and x, are normal.

Question 5 (20 points) Decompose the total effect of a price increase in x, into income and substitution effects. Assume x, and x, are normal. a) Explain how the mechanic of the substitution effect works in this situation. (5 points) 6) Explain how the mechanic of the income effect works in this situation. (5 points) c) Illustrate the impacts of a price increase in x, in the following x -x, graph. Please identify and label the substitution and income effects. (10 points)

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