Suppose that a consumer earns wage income of $450 per week, and 52 weeks per year...

Suppose that a consumer earns wage income of $450 per week, and 52 weeks per year

a. Construct a yearly income-leisure constraint.

b. If the consumer chooses 20 weeks for work, graphically explain this choice of work and leisure

behavior.

c. The government considers to offer an income supplement program of $200 per week, or the

maximum of $10400 per year for this consumer. If the government wants to avoid detracting

from this consumer’s current motivation to work, what policy option (payment method)

should the government choose? Graphically explain it.

Solutions

Expert Solution

Rahul Sunny answered 2 weeks ago

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