5. Suppose that Jim’s demand function for saltines is:
QS = 8 + M/54PS
Jim makes $216 and the price of saltines is originally $2 per box. Suppose PS falls to $1 per box.
a) Find the Total Effect, the Substitution Effect and the Income Effect due to the price change.
b) Are saltines a normal or an inferior good for Jim?
c) Draw the graph of the Slutsky decomposition for this problem.
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