An agent has income m that can be spent on frequent flier miles f or on other goods - a "composite good" g. Their respective prices are: Pf = 10 per mile and Pg = 1 per unit. The flier miles have a stepwise price schedule. After the first 25 miles the price is reduced by 20% and after 50 miles the price is further reduced by another 50%.

1. Put g on the vertical axis and f on the horizontal axis. Assume m = 200, and draw the budget constraint with all the intercepts and appropriate slopes.
2. On a separate graph, repeat part (1) for m = 300.
3. On a separate graph, repeat part (1) for m = 600.