Q:The central government match a local governments $1 expenditure on education by $0.25.

1. How does this matching grant affect the price of education for the local government?

2. Draw a graph with the private consumption on the vertical axis and the expenditure on education on the horizontal axis. Then utilize community indifference curve and the local government budget constraint to analyze how this matching affect the local governments spending on education? Please note the substitution effect and the income effect on the graph.