Please solve the only part c, part d, and e. The answers should be very detailed and clear, THANK YOU!!! Mahmut Tuncer derives utility from Halay course (a Turkish traditional dance) (H) and çiğ köfte (a Turkishtraditional food) (C) as given by the following utility function:U (H, C) = VHCThe average price for the halay course is 20 TLs and for çiğ köfte 16 TLs. Moreover, Mahmut Tuncer has a budgetof 80 TLs.a) Use Lagrange optimization method to find Mahmut Tuncer's utility maximization choice of consumptionbundle. Find also his utility level from consuming that bundle.b) Assume that price of çiğ köfte increases to 25TLS. Suppose Mahmut Tuncer also changed his budget forconsumption and we do not know it. Denote Mahmut Tuncer's budget by a and find his demand for H and Cunder the new conditions as a function of a.c) Find the income level which is necessary to make Mahmut Tuncer reach the same utility level as before theprice change.d) Compute the quantities demanded with the new prices and the income you found in section c.e) Compute the quantities demanded with the new prices and the original budget of 800TL.f) Using the results you get above, calculate the total change in quantity of çiğ köfte due to the price increase?What part of that change is due to income or substitution effects? Also describe what income and substitutioneffects mean.g) Draw a graph showing the income and substitution effects that you have calculated in part f).

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Answered: Please solve the only part c, part d

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Please solve the only part c, part d

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please solve the only part c, part d, and e. The answers should be very detailed and clear, THANK YOU!!!

Mahmut Tuncer derives utility from Halay course (a Turkish traditional dance) (H) and çiğ köfte (a Turkish
traditional food) (C) as given by the following utility function:
U (H, C) = VHC
The average price for the halay course is 20 TLs and for çiğ köfte 16 TLs. Moreover, Mahmut Tuncer has a budget
of 80 TLs.
a) Use Lagrange optimization method to find Mahmut Tuncer's utility maximization choice of consumption
bundle. Find also his utility level from consuming that bundle.
b) Assume that price of çiğ köfte increases to 25TLS. Suppose Mahmut Tuncer also changed his budget for
consumption and we do not know it. Denote Mahmut Tuncer's budget by a and find his demand for H and C
under the new conditions as a function of a.
c) Find the income level which is necessary to make Mahmut Tuncer reach the same utility level as before the
price change.
d) Compute the quantities demanded with the new prices and the income you found in section c.
e) Compute the quantities demanded with the new prices and the original budget of 800TL.
f) Using the results you get above, calculate the total change in quantity of çiğ köfte due to the price increase?
What part of that change is due to income or substitution effects? Also describe what income and substitution
effects mean.
g) Draw a graph showing the income and substitution effects that you have calculated in part f).

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