Question

An individual can earn $12 per hour if he or she works. Draw the budget constraints
that show the monthly consumption–leisure trade-off under the following three welfare
programs.
a. The government guarantees $600 per month in income and reduces the benefit by $1 for each $1 of labor income.
b. The government guarantees $300 per month in income and reduces that benefit by $1 for every $3 of labor income.
c. The government guarantees $900 per month in income and reduces that benefit by $1 for every $2 in labor income, until the benefit reaches $300 per month. After that point, the government does not reduce the benefit at all.


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  • CreatedApril 25, 2015
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