Ann’s only income is her annual college scholarship, which she spends exclusively on gallons of ice cream and books. Last year when ice cream cost $10 and used books cost $20, Ann spent her $250 scholarship on five gallons of ice cream and ten books. This year, the price of ice cream rose to $15 and the price of books increased to $25. So that Ann can afford the same bundle of ice cream and books that she bought last year, her college raised her scholarship to $325. Ann has the usual-shaped indifference curves. Will Ann change the amount of ice cream and books that she buys this year? If so, explain how and why. Will Ann be better off, as well off, or worse off this year than last year? Why?
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