Question

In: Economics

TANF is the current iteration of welfare designed to aid poor families with children. Graph the...

  1. TANF is the current iteration of welfare designed to aid poor families with children.
    1. Graph the TANF budget constraint and graph a possible optimal hours choice for an individual that has a preference for leisure.
  1. When in the program, what are the effects on work incentives from income and substitution effects?.

Solutions

Expert Solution


TANF Budget Constraint mentioned in the Picture 1 and Income and labour, Leisure relationship mentioned in Picture 2

1. Explanation Budget Constraint:

Though there is straight line mentioned as direct proportionate between available cash and number of families supported, there are possiblity of managing to serve all the families planned families by reducing the amount spent on each family. But as per original budget, deviation from planned budged will have direct proportion and so the budget constraint topic arises.

2. Explanation on labor and leisure

Ideally Labor hours and leisure hours are inversly proportionate to the Income, If the income has to rise then labor hours has to increase and lesure hours has to decrease. But this is more relavant beyond the breaking point that is until the basic needs gets fulfilled, People ignore leisure and then after that equilibrium most people tend to ignore income and prefer to go for leisure.


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