A labourer earns €53 per week and chooses to consume only ham and cheese sandwiches. Ham costs €0.75 a slice and cheese costs €0.50 per slice, bread is provided free of charge by his employer. The labourer spends his entire earnings on ham and cheese sandwiches that comprise 1 slice of cheese, 2 slices of ham and 2 slices of bread a. How much ham and cheese will the labourer purchase each week?b. If the price of cheese increases to €0.75 per slice (ceteris paribus), how will the labourer’s choice change?c. What increase in income would the labourer require to return his total utility to the level he was achieving before the price increase?d. Graph your results in parts (a) to (c).e. If ham and cheese sandwiches are perceived as a single commodity, illustrate the demand curve for ham and cheese sandwiches.f. Discuss the results of this problem in terms of the income and substitution effects involved in the demand for cheese.
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