2. Across some Scandinavian countries an experiment with a concept called Universal Basic Income is taking...

2. Across some Scandinavian countries an experiment with a concept called Universal Basic Income is taking place. The next question relate to this issue

a. Please do a search UBI and explain what it is.

b. Using the budget line and indifference curve between income and leisure,

• Draw and explain what would happen to the budget line, be sure to discuss if there are changes in the slope or not. Draw the new utility maximization income-leisure combination

• Based on the changes discussed above, explain if there are substitution and income effects.

• Predict the effect of BUI on people’s utility and their income-leisure decisions.

c. If you can find any evidence on the effects of the program please summarize it and cite the sources.

Solutions

Expert Solution

the above graph shows the effect of Universal basic income (UBI). since it is unconditional and universal it promotes disincentive to work.substitution effect is greater than income effect and individuals would like to trade income for leisure i.e. the would prefer to enjoy more rather than working.

the overall utility increases.people would get basic income which they would spend as per their requirements rather than earlier benefits which was given in the form of medicare , pension funds etc. at the same time it promotes disincentive to work . people woould choose to work for lesser hours as their basic requirements are easily fulfilled now and they would better choose more time for leisure than labour.

If UBI is small , then it doesnt facilitate disincentive to work , rather it decreases unemployment rate tjough certain evidences are there that people take up part time job instaed of full time job

finland is the first country to be successfully launchhing UBI scheme which costed her around €20m (£17.7m) – by a government interested primarily in bringing down 8% plus unemployment rate and spending less on social security. their sole motive to implement such a scheme is to see : to see whether an unconditional income might encourage people to take up paid work.

No official conclusion have been drawn yet, but on an interview with indiaviduals many have revealed that it has decreased their stress levels

Rahul Sunny answered 1 year ago

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