The average California homeowner has a demand function for energy, x1, in kWh {kilo~ watt hours}. @192 m =3m+_m 1 1mm 2m where x; is water 5: sewer usage, per 1,000 gallons. 1. la} Energy is a normal good, but is it a luxury or necessary good? Explain. 2. [h] Are energy and water El sewer complements or substitutes? Explain. 3. [c] The current price of energy is $0.10 per kWh [= p1}, and the current rate of water 5: sewer is $20 per 1,000 gallons [= p2}. The average homeowner has an income of $40,000 {= m}. Energy prices are announced to increase to $0.20 per kWh. Calculate the income and substitution effects. Interpret these effects