Question

In some countries, cash assistance, say $700 per month are given to eligible people
(such as single mother with children) as long as they remain outside the labour force.
If these people enter the labour force, the government assumes that they no longer
need the public assistance and the women are dropped from this welfare program
regardless of how much they earn. Using proper diagram, explain the impact of this
cash assistance on work incentive for a single mother with children. In particular,
you must utilise indifference curve analysis to explain your answer. Assumption: The
mother does not have other options of nonlabour income except cash assistance of
$700.

Answer 1