The McCains are having a tough time making ends meet. They spend $100 a week on food and $50 on other things. A new welfare programme has been introduced that gives them a choice between receiving a grant of $50 per week that they can spend any way they want, and buying any number of $2 food coupons for $1 apiece. (They naturally are not allowed to resell these coupons.) Food is a normal good for the McCains. As a family friend, you have been asked to help them decide on which option to choose. Drawing on your growing fund of economic knowledge, you proceed as follows: a. Draw their old budget line in red ink and label their current choice C. Now use black ink to draw the budget line that they would have with the grant. If they chose the coupon option, then how much food could they buy if they spent all their money on food coupons? How much could they spend on other things if they bought no food? Use blue ink to draw their budget line if they choose the coupon option. b. Using the fact that food is a normal good for the McCains, and knowing what they purchased before, darken the portion of the black budget line where their consumption bundle could possibly be if they chose the lump-sum grant option. Label the ends of this line segment A and B. c. Based on your graph, which programme should the McCains select? d. Mrs McCain thanks you for your help and then asks, "Would you have been able to tell me what to do if you hadn't known whether food was a normal good for us?" On a new graph, draw the same budget lines you drew in part (a), but draw indifference curves for which food is not a normal good and for which the McCains would be better off with the programme you advised them not to take. The McCains are having a tough time making ends meet. They spend $100 a week on food and $50 on other things. A new welfare programme has been introduced that gives them a choice between receiving a grant of $50 per week that they can spend any way they want, and buying any number of $2 food coupons for $1 apiece. (They naturally are not allowed to resell these coupons.) Food is a normal good for the McCains. As a family friend, you have been asked to help them decide on which option to choose. Drawing on your growing fund of economic knowledge, you proceed as follows: a. Draw their old budget line in red ink and label their current choice C. Now use black ink to draw the budget line that they would have with the grant. If they chose the coupon option, then how much food could they buy if they spent all their money on food coupons? How much could they spend on other things if they bought no food? Use blue ink to draw their budget line if they choose the coupon option. b. Using the fact that food is a normal good for the McCains, and knowing what they purchased before, darken the portion of the black budget line where their consumption bundle could possibly be if they chose the lump-sum grant option. Label the ends of this line segment A and B. c. Based on your graph, which programme should the McCains select? d. Mrs McCain thanks you for your help and then asks, "Would you have been able to tell me what to do if you hadn't known whether food was a normal good for us?" On a new graph, draw the same budget lines you drew in part (a), but draw indifference curves for which food is not a normal good and for which the McCains would be better off with the programme you advised them not to take