You and your roommate both enjoy Blue Bunny cookie dough ice cream. At the campus store, you can buy a pint of ice cream for $3. In your last visit to the store, you noticed Blue Bunny ice cream was on sale for 50% off. You are excited about the sale and stock up on pints of ice cream, but to your surprise, your roommate purchases fewer pints of Blue Bunny, opting instead to purchase more of Ben and Jerry's ice cream. Explain how each decision relates to concepts of income and substitution effects. a. Because of the decrease in the price of Blue Bunny ice cream, your marginal utility of Blue Bunny per dollar went up and you bought more of it. This effect on quantity consumed comes from the income effect b. A decrease in the price of Blue Bunny ice cream makes your roommate feel relatively richer. This is due to the income effect The fact that your roommate chooses to purchase Ben and Jerry's instead tells us that your roommate views Blue Bunny as a(n) inferior good
