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Problem Set 2 it SIAI & # HA 11 " A" A" Aa Ap by A aBbCcDdBe AaBbCcDdEc AaBbC AaBbCCD| AaBbCCD ab X, x ? Problems: ~ 6) Gavin has $110,000 in income and consumes two goods: electric cars and "everything else." An electric car costs $50,000 and a unit of "everything else" costs $1. a. With quantity of electric cars on the horizontal axis and quantity of "everything else" on the vertical axis, draw Gavin's budget line. (You may assume that electric cars can be bought in increments. For instance, you can buy 0.5 electric cars.) Be sure to label the intercepts and denote the slope of the budget constraint. Suppose that Gavin buys one electric car. Add to your previous graph the indifference curve consistent with this choice. ~ The government decides to promote demand for electric cars by offering a $6,000 subsidy that lowers the out-of-pocket cost of buying an electric car to $44,000. Add to your previous graph the new budget line. Be sure to label the intercepts and denote the slope of the new budget constraint. d. Suppose that Gavin still buys one electric car. Add to your previous graph the second, higher- utility indifference curve consistent with this choice. - Suppose there is another person, Eleni, who also has $110,000 of income, but she would not have bought an electric car without a subsidy. With the $6,000 subsidy, Eleni buys one electric car. In a separate graph, repeat parts a-d for Eleni. (In order to draw the indifference curve when Eleni 158%