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Unformatted text preview: Cheerios (H) cereals. U(C, H) = C + H. Bill currently has an income of $10 and faces prices of P c = 1 and P H = .5. a. When he is maximizing his utility, how many boxes of each type of cereal will Bill purchase? b. Draw Bills best indifference curve and his budget constraint on the graph below. Label the axes, intercepts and curves carefully. c. Suppose P H drops to 25 cents per box. What portion of the change in Bills consumption was due to the income and substitution effects? Explain carefully....
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