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John has a monthly allowance of $40. He spends all of this income onmusic track downloads and "other goods". Draw an indifference curvediagram with music downloads on the horizontal axis and "dollars spent onother goods" on the vertical axis. When the price of music downloads is $1per download, John downloads 12 tracks per month. Draw your diagramshowing John making this choice. Suppose that the price of rises to $2per month.A. Show John's new choice of downloads in your diagram. (Note:each person's answer will differ as it depends on how you draw theindifference curves.)B. In your diagram, identify and label the income and substitutioneffects of this price increase on John's music downloads.

Microeconomics, Economics

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