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Unformatted text preview: quinine after it has become more expensive. c) The experimental economist is a rather lazy fellow, and would like you to provide the relevant Hicks decomposition which would explain the results observed above. Please oblige with drawing the appropriate graph (scale is not important) and a detailed explanation to accompany your graph. Explain and label the relevant compensated budget line, income, substitution and total effects of the price change. d) Our lazy economist had heard that it might be useful to provide an Engel curve as well, but it's been a long time since he was in second year, and he can't remember what an Engel curve is, never mind why it might be useful. Please explain what Engel curves illustrate, why it might be useful in the given context and what slope you expect this Engel curve to have. e) The quinine experiment is referenced at http://en.wikipedia.org/wiki/Giffen_good Tutorial 3 Page 1...
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- Spring '11