Graphically draw and explain the income effect curve: 1.Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie’s income is m. (b)Suppose m = $60. Write down Annie’s budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully.  (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve.

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A:

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A: Hey, Thank you for the question. According to our policy, we can only answer up to 3 subparts per…

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