2} Consider Calvin. He thinks of the world as consisting of today and his destiny. Calvin has income of Y; today and is destined to get income of Y5. Because his friend Hobbes requires more tuna, Calvin's desired consumption today {Cl} exceeds the income he receives today. Unfortunately for Calvin. he cannot borrow today because an acquaintance, Susie? has informed everyone that Calvin is a bad credit risk- [Ra M $3043}; Notes EEf a) Use a diagram to show both Calvin's consumption today and his destined consumption. b} Now assume that Mrs Wormwood is the Minister of Finance and introduces a compul sory savings scheme. Use your diagram from a) to show how this policy affects the welfare of Calvin. Is he better or worse off? 3) The management of Cobb and Douglas Ltd are trying to work out if they should expand their business. Their accountants and engineers have provided them with details of their company which they are working through to make a capital investment decision. The engineers have informed them that the overall production structure of the company can be dwcribed by y = dKILl, where y is output, If is capital