8. Discuss how changing the implicit tax rate from 100% under the welfare program before...
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8. Discuss how changing the implicit tax rate from 100% under the welfare program before the 1996 reform to a 25% implicit tax rate under the 1996 reform will reduce the disincentive under the 1005 rate. In your answer address the following: a. Draw a diagram of the consumer model using income of the y-axis and leisure on the x-axis. b. Discuss why the slope is equal to the wage rate. c. Illustrate and discuss how an individual earning less than the guaranteed amount will| have a strong incentive to reduce work to 0 hours. d. Illustrate and discuss how lowering the implicit tax rate from 100% to 25% will induce this person to increase work from 0 hours to some positive amount
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