Question

Walt earns $5 per hour in his job as a caretaker. After allowing time for all of the activities necessary for bodily upkeep, he has 80 hours per week to allocate between leisure and labor. Assume that each unit of consumption can be purchased for $1. 1st attempt Part 1 (1 point) See Hint Suppose the government has the following policy: If an individual is not working, he receives a tax-free payment of $100. If he works, he does not receive the $100, and all wages are subject to a 50% income tax. Draw the budget constraint for Walt by using the line tool and point tool on the graph below.

Please help me graph both questions :) thank you

Answer 1

Part 1 :-

Combination	Work	Leisure	Pre tax consumption	Post tax consumption
A	0	80	100	100
B	10	70	50	25
C	20	60	100	50
D	30	50	150	75
E	40	40	200	100
F	50	30	250	125
G	60	20	300	150
H	70	10	350	175
I	80	0	400	200

in the above budget line the the points between B to I represents a person's consumption level with different hours of leisure he is enjoying however after point B, the point A is par with point E Because when he is not working he is receiving a grant of $100 which shifts him to point A .

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Part 2 :-

Combination	Work	Leisure	Per tax consumption	Post tax consumption
A	0	80	100	100
B	10	70	50	50
C	20	60	100	100
D	30	50	150	75
E	40	40	200	100
F	50	30	250	125
G	60	20	300	150
H	70	10	350	175
I	80	0	400	200

in the above graph the points D to I represents the post tax consumption bundles at various levels of leisure while point B and C falls on the line BL that represents the per tax consumption level .The points B and C are following on the pre tax consumption level budget line because the government is imposing tax only when the hours of work are more than 20 .While the point A represents the benefit of Grant by unemployed people who choose to spend all hours in Leisure and no hours in working . It is evident from the above graph that point A , C and E falls at Par .

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