You come across an Internet offer: with a $100 annual membership contribution to the National Geographic Society, you can get a 50 percent discount on purchases from the National Geographic online gift shop. Suppose that you get no utility from the membership per se, but have friends who enjoy unusual gifts. Suppose also that you had been purchasing $200 worth of gifts annually from the online shop before seeing the offer. You are a rational, well-behaved consumer, with $400 per year to spend on discretionary purchases like gifts.

a. Draw precisely, with numeric labels, your budget set if you take the offer, and your budget set if you do not, in the diagram below. Draw an indifference curve at your optimum prior to the offer, and indicate the numerical amounts spent on gifts and other items at that optimum.

b. Will you want to take the offer? Explain, and support your explanation with reference to the diagram.

c. If you were to take the offer, would your gift purchases now be higher, lower, or unchanged? Explain, also with reference to the diagram.