A consumer's income in the current period is y=200, and income in the future period is y'=240. He or she pays lump-sum taxes t=10 in the current period and t'=15 in the future period. The real interest rate is 0.2 per period (20%). Assume that the current and future consumption are complements, and the consumer always prefers to have one unit of current consumption and two units of consumption in the future.

a.Assume that the current and future incomes increase by 10% each, respectively. Calculate the new optimal current and future consumptions.

b.Draw a diagram to illustrate the consumer's budget constraint, indifference curve, endowment point, and optimal consumption bundlein part a.