When the Smith family lived in Japan they consumed 4 lbs of rice per week and 2 lbs of potatoes per week. When the Smith family lived in Germany their consumption drastically changed to 4 lbs of potatoes per week and 2 lbs of rice per week. Using consumer choice diagrams graphically show the multiple reasons this change in consumption bundles may have occurred. Assume only that the Smith family’s income level is the same whether they lived in Japan or Germany. When drawing your diagram place rice on the X-axis. Hint: How might the ICs and BCs look under each explanation?

Hint: Although we normally see from data that people preferences stay constant across time, is it possible that someone's preferences can change and that their choices are then influenced by this? What about if prices change?

Technical Directions: It might be best to insert pictures of your graphs into your explanation