Question $1(10$ total marks$)$

Consumer Theory

a$)$ Using indifference curve analysis, illustrate and explain which the consumer would prefer: an inkind gift of good X$,($e$.$g$.$ a pair of socks worth $\backslash$$$20)$ or a cash gift of the same dollar value. $($Assume the gift is not something the consumer would have bought for themselves, and that $\backslash ($ X $\backslash )$ and $\backslash ($ Y $\backslash )$ are both economic goods.$)(5$ marks$)$

b$)$ Using indifference curve analysis, illustrate and explain which the consumer would prefer: a matching grant, by which the consumer would receive $\backslash (\backslash$$ $1\backslash )$ for every $\backslash (\backslash$$ $1\backslash )$ spent on good $\backslash ($ X $\backslash )($conditional grant$),$ or an unconditional grant of the same dollar amount as would be obtained with the conditional grant. Which type of grant is considered to be more efficient and why?

$(5$ marks$)$