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Suppose a typical income leisure constraint. The wage rate for a typical consumer is $20 per hour,...

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Economics

Suppose a typical income leisure constraint. The wage rate for atypical consumer is $20 per

hour, and she works 10 hours per day. Assume there are 52 weeksper year.

a. Construct a yearly income-leisure constraint for thisconsumer. Graphically show the optimal

work-leisure choice for this consumer.

b. Assume that the wage rate is increased to $25 per hour.Assuming income effect dominates,

graphically show a new possible work-leisure choice for thisconsumer.

c. Suppose that the government considers an income supplementprogram for this consumer

providing $5000 per year. Assuming holding all of theassumptions given in #b, is it a good

policy for the economy in general for this society? Explain itwith the relevant economic

theoretical justifications.

Answer & Explanation Solved by verified expert
3.6 Ratings (448 Votes)
a the optimal choice on the income leisure constraint isincome of 72800 yearly 5271020 and leisure time of 5096hours52714 square region shows leisure and triangle showshours workedNOTE THE TOP FIGURE IS BEING REFERRED TO AND THE POINTMENTIONED ON X AXIS IS NOT 728 IT IS 5096 HOURSPLEASE CORRECTWHILE YOU DRAW    See Answer
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