1)Matt has $500 of income to spend traveling on hotels and puzzles. The price of a puzzle is $10 and the price of a hotel is $50.

a. Diagram Matt's budget constraint.

Now, suppose Matt's parents buy him a $300 gift certificate each semester that can only be used to buy books.

b. Diagram Matt's budget constraint when he has the gift certificate in addition to his $500

income.

c. Is Matt better off with the gift certificates? Illustrate this using indifference curves.