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1. (a) Illustrate, using diagrams, the income and substitution effect of a price fall for a normal good. Suppose there are two goods, telephone calls and bread. Bread costs є1 per loaf and income is €5. Under the existing scheme that the telephone company offers, Joe incurs a fixed fee of 2 which entitles him to 10 free calls and any calls made in excess of 10 incurs a cost of 0.10 per call. Under this scheme Joe chooses to make 20 calls and buys 2 loaves of bread. (b) Draw the budget constraint and the indifference curve for this problem. (c) The phone company offers him a new scheme with no fixed charge and all calls costing є0.15. Draw the new budget constraint. Will Joe accept this new scheme and if so will he make more or less calls. Explain your answer using diagrams

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