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1) Hassan buys onyl milk and sweet potatoes.
a) In year 1, Hassan earns $100, milk is priced at $2 per liter and sweet potatoes are priced at $4 per kilo. Draw Hassan's budget constraint.
b) Now suppose that all prices increase by 10 percent in year 2 and that Hassan's salary increases by 10 percent as well. Draw Hassan's new budget constraint. How would Hassan's optimal combination on milk and sweet potatoes in year 2 compare to his optimal combination in year 1?
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