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Could not understand part b onwards 3. The Mccawber family is having a tough time making ends meet. They spend $100 a week on food

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Could not understand part b onwards

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3. The Mccawber family is having a tough time making ends meet. They spend $100 a week on food and $50 on other things. A new welfare program has been introduced that gives them a choice between receiving a grant of $50 per week that they can spend any way they want, and buying any number of $2 food coupons for $1 apiece. (They naturally are not allowed to resell these coupons.) Food is a normal good for the Mccawbers. As a family friend, you have been asked to help them decide on which option to choose. Drawing on your growing fund of economic knowledge, you proceed as follows. (a) On a graph, draw their old budget line and label their current choice C. Now draw the budget line that they would have with the grant. If they chose the coupon option, how much food could they buy if they spent all their money on food coupons? How much could they spend on other things if they bought no food? Draw their budget line if they choose the coupon option. (b) Using the fact that food is a normal good for the Mccawbers, and knowing what they purchased before, darken the portion of the budget line with the grant where their consumption bundle could possibly be if they chose the lump-sum grant option. Label the ends of this line segment A and B. (c) After studying the graph you have drawn, you report to the Mccawbers. "I have enough information to be able to tell you which choice to make." Which option is your suggestion? Why? (d) Mr. Mccawber thanks you for your help and then asks, "Would you have been able to tell me what to do if you hadn't known whether food was a normal good for us?" On a different graph, draw the same budget lines you drew previously, but draw indifference curves for which food is not a normal good and for which the Mccawbers would be better off with the program you advised them not to take

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