Finally,examine the following information about Jane's choices: X Week 1 12242 1 48 Week 2 16321 1 48 Week3 12241136 Draw a budget line,indifference curve graph that illustrates Jane's three chosen hundl les.What can say about Jane' s preferences in this case? Identify the income and substitution effects that result from a change in the price of good 1. In week 2.the price of good 1 goes down and Jane consumes more of both goods.Her budget line pivots outwards.In week 3 the prices remain at the new level but Jane's income is reduced.This will shift her budget line inwards.and eause her to consume less of both goods.Notice that Jane cons nes the two goods in a fixed 1:2 ratio. This means that Jane views the two goods perfect complements,and her indifference curves are L-shaped.Intuitively if the two goods are complements.there is no reason to substitute one for the other during a price change because they have to be consumed in a set ratio.Thus the substitution be When the price ratio change and utility is ke at th ame level,Jane will ch th ame point(12.24) The in come effec causes her to buy 4 more units of good 1 and 8 more units of good 2. good 2 week 1 and3 und le week 2 bundle good I 6.Two individuals,Sam and Barb,derive utility from the hours of leisure (L) they consume and from the amount of goods(G)they consume.In order to maximize utility they need to allocate the 24 hours in the day between leisure hours and work hours.Assume that all hours not spent working are leisure hours. The price ofa good is qual to $I and the price equal to the hourly wage.We observe the following information about the choices that the two individuals make: Sam Barb Sam Barb Price ofG Price of L L(hours) L(hours) G(S)G(S) c. Finally, examine the following information about Jane’s choices:  x1  x2  P1  P2 I Week 1 12 24 2 1 48 Week 2 16 32 1 1 48 Week 3 12 24 1 1 36 Draw a budget line, indifference curve graph that illustrates Jane’s three chosen bundles. What can you say about Jane’s preferences in this case? Identify the income and substitution effects that result from a change in the price of good 1. In week 2, the price of good 1 goes down and Jane consumes more of both goods. Her budget line pivots outwards. In week 3 the prices remain at the new level, but Jane’s income is reduced. This will shift her budget line inwards, and cause her to consume less of both goods. Notice that Jane always consumes the two goods in a fixed 1:2 ratio. This means that Jane views the two goods as perfect complements, and her indifference curves are L-shaped. Intuitively if the two goods are complements, there is no reason to substitute one for the other during a price change because they have to be consumed in a set ratio. Thus the substitution effect will be zero. When the price ratio changes and utility is kept at the same level, Jane will choose the same point (12,24). The income effect causes her to buy 4 more units of good 1 and 8 more units of good 2. good 1 good 2 week 1 and 3 bundle week 2 bundle 6. Two individuals, Sam and Barb, derive utility from the hours of leisure (L) they consume and from the amount of goods (G) they consume. In order to maximize utility they need to allocate the 24 hours in the day between leisure hours and work hours. Assume that all hours not spent working are leisure hours. The price of a good is equal to $1 and the price of leisure is equal to the hourly wage. We observe the following information about the choices that the two individuals make: Sam Barb Sam Barb Price of G Price of L L(hours) L(hours) G($) G($)