Suppose that our representative consumer lives for one period, earns 5 coconuts an hour (that is w = 5), enjoys non-earned income of 8 coconuts (that is = 8), pays lump sum tax of 7 coconuts (that is T = 7), and has the following preferences over consumption and leisure U(c, l) = min(4c, 3l). Also, assume that = 16, where h is total time available to our consumer.

First, determine the consumer's optimal choice of consumption and leisure and show optimal consumption bundle, indifference curves and budget constraint in a diagram with the consumption on the vertical axis and leisure on the horizontal axes).

Second, assume that the lump sum tax is increased to 9 coconuts. Illustrate this new budget constraint in a separate diagram.