For Phil, both peanut butter and bananas are normal goods. They are also ordinary goods for Phil. The price of peanut butter rises, but the price of bananas remains unchanged.
a.Can you determine definitively whether he consumes more or less peanut butter? Explainwith a diagram of indifference curves and a budget constraint, placing peanut butter onthe horizontal axis and bananas on the vertical axis. (Explain in terms of the income and substitution effects)
b. Can you determine definitively whether he consumes more or less bananas? Explain with a diagram and a brief explanation, placing peanut butter on the horizontal axis and
bananas on the vertical axis.
