hoping for some help in the following question. please let me know if you need any clarification

1. Consider the consumption-savings model from the lecture notes, except that there is a xed cost to borrowing. That is, a household that wants to borrow any amount must pay a cost, 2 (in units of current income), in order to access the demand side of the nancial market. This cost is finned in the sense that it does not change with the amount of borrowed funds. A household that chooses not to borrow does not have to pay the cost. Everything else about the model is the same as in the lecture notes, including the fact that preferences satisfy the \"standard\" assumptions. (i) Draw a representative indifference curve. Illustrate the assumption that prefer- ences are convex in your diagram, with an accompanying explanation. [NOTE: do not include the budget constraint in this diagram.] [3 points] (ii) On a separate diagram, draw the budget line. [3 points] (iii) Draw a diagram depicting a household that optimally chooses neither to borrow nor lend (i.e., the household chooses to consume its income in both periods). [3 points] (iv) Draw two more diagrams: one depicting a household that optimally chooses to save, and another depicting a household that optimally chooses to borrow. [3 points] (v) Consider again the case where the household starts out with an optimal choice of neither borrowing nor lending (as in part (iii)). Suppose the real interest rate, 1", increases enough to change the household's optimal choice. What happens to the optimal values of c, c', and 8 following the increase in interest rate? Draw a diagram to illustrate the changes. Provide a brief explanation that references income and substitution effects. [3 points]