Consider the following two antipoverty programs: (1) A payment of $10/ day is to be given this year to each person who was classified as poor last year; and (2) each person classified as poor will be given a benefit equal to 20 percent of the wage income he earns each day this year.
a. Assuming that poor persons have the option of working at $4/ hr, show how each program would affect the daily budget constraint of a representative poor worker during the current year. b. Which program would be most likely to reduce the number of hours worked?