Sasha got fired from her sweet job as an accountant, and is now earning only $25...

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Sasha got fired from her sweet job as an accountant, and is now earning only $25 before taxes. If she can work up to 8 hours per day, 5 days per week, draw out the weekly budget constraint on the same graph under two scenarios: (1) there are no taxes and (2) there is a 15% tax on all income. Draw this figure twice. In one figure, show the income effect is larger than the substitution effect by drawing the relative position of two indifference curves. In the other figure, show that the substitution effect is larger than the income effect by drawing the relative position of two indifference curves. Sasha got fired from her sweet job as an accountant, and is now earning only $25 before taxes. If she can work up to 8 hours per day, 5 days per week, draw out the weekly budget constraint on the same graph under two scenarios: (1) there are no taxes and (2) there is a 15% tax on all income. Draw this figure twice. In one figure, show the income effect is larger than the substitution effect by drawing the relative position of two indifference curves. In the other figure, show that the substitution effect is larger than the income effect by drawing the relative position of two indifference curves.

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Here are two figures showing the budget constraints and indifference curves for Sashas situation wit... View the full answer