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Please refer to the attached image 4. Gladys (who is careful with her money) is going to give her daughter, Beatrice, money for her birthday,

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4. Gladys (who is careful with her money) is going to give her daughter, Beatrice, money for her birthday, and wants to minimise the amount she gives subject to Beatrice being able to attain a specified, fixed level of utility, uo. Beatrice's utility function (which is known to Gladys) has indifference curves with the usual properties and she consumes two goods, x and y with prices px, py respectively; Beatrice's income consists entirely of Gladys' cash gift to her, all of which she will spend on x and y. (a) Use a diagram to illustrate Beatrice's optimal choice. Explain carefully the nature of , Gladys' choice problem in terms of this diagram. (5 marks) (b) What will happen to the amount of x Beatrice consumes, and the amount of money Gladys will give her, if px rises? Answer by careful reference to a diagram only. Explain, briefly why you can be sure of the directions of these two effects of the rise in px by reference only to the diagram. Can you think of an example (possibly involving unconventional indifference curves) where the rise in px results in no additional expenditure for Gladys

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