Answer the following questions .
- A consumer splits their income equally between two goods. If the price of one good increase by 10% and their income increases by 5%, show that the consumer’s optimal consumption bundle will change despite them being able to afford their original bundle.
- When estimating a demand function, explain why fitting a line of best fit through observed price and quantity combinations over time is not likely to yield good estimates.
- If a firm uses only capital and labour, show why the cost minimising combination of inputs sets: .
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