Problem 1 * Dilemma of Giving: Economist Joel VValdfogel laments what he calls the \"dead weight loss of Christmas\" created when people give gifts (such as ugly sweaters) the recipients would rarely, if ever, buy for themselves. With holiday giving, similar to public policies, consump tion choices are made by someone who is not the gift recipient. Despite best intentions, the gift may not match the recipients' preference.* a) Draw a graph with a budget constraint showing affordable bundles of a composite good costing $1 and ugly sweaters (You may assume some level of income and a price for ugly sweaters.) b) Cheryl might get some utility from an ugly sweater but is currently spending all of her income on the composite good. Add an indifference curve that reects Cheryl's situation. What must her indifference curves look like? c) Suppose Cheryl receives a gift of an ugly sweater from a coworker. Show the effect of the gift on Cheryl's budget constraint. Where on the constraint is Cheryl likely to maximize her utility? d) VValdfogel suggests that the world might be happier if people gave an equivalent amount of cash instead of giving ugly sweaters. Draw the budget constraint Cheryl would face if this were the case. Add an indifference curve or two to show what happens when Cheryl maximizes her utility. Does the cash gift make her happier than the sweater? e) Explain why eBay or thrift stores might be used when ugly sweaters are given instead of gift cards and indicate the effect on Cheryl's budget set