3) Oğuz has the utility function U (X1,X2) = X:*x2?. (x:: nuts, x: berries). a) If Oğuz has 25 units of nuts and 17 units of berries, the price of nuts is 2 and the price of berries is 1 liras, what would be the optimal consumption of Oğuz? b) Assume the prices change, so that nuts cost 1 and berries cost 3 liras. What is the new demand? In this change, What is the pure substitution effect? What is the income effect? c) In the change calculated in part (b), what is the pure substitution effect? d) In the change calculated in part (b), what is the income effect? 9 In the change calculated in part (b), what is the endowment effect?

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Q: Would you expect marginal utility to rise or fall with additional consumption of a good? Why?

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A:

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A:

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A:

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A:

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A:

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Q: find i

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