Emma’s wage rate is $10 per hour and she has a maximum of 100 hours per...
Emma’s wage rate is $10 per hour and she has a maximum of 100 hours per week to allocate between leisure and work. In the absence of any tax on wage earnings, Emma optimally chooses to work 40 hours per week.
The following tax is imposed. Emma is not taxed on the first $240 earnings per week, but each dollar earned beyond that is taxed at 10%. Does the tax cause Emma to work more, work less, or have no affect on her work decisions? Explain and show graphically using budget constraints and indifference curves. In your answer, describe how a tax impacts work decisions through both the substitution effect and income effect.
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Emma’s wage rate is $10 per hour and
she has a maximum of 100 hours per...
Pat's wage rate is $6 per hour and she has a maximum of 100 hours per...
Pat's wage rate is $6 per hour and she has a maximum of 100 hours per week to allocate between leisure and work. Without any welfare assistance program, Pat chooses to work 37.5 hours per week. a. Suppose Pat is eligible for welfare benefits of $225 per week, but benefits are reduced $1 for every $1 she earns. Draw the budget line (label all relevant values) and indifference curve that represents Pat's maximum utility under these circumstances. b. The structure...
(10) A person earns a wage $10 per hour and has 100 hours per week to...
(10) A person earns a wage $10 per hour and has 100 hours per week to allocate between leisure and work. At the $10 wage, the person chooses to consume 65 hours of leisure per week. a. Draw the labor-leisure graph showing the situation described above. Make sure to label all intercepts, axis, and relevant slopes in your graph. b.The wage increases to $15 per hour. Assume the substitution effect exceeds the income effect. Show on your graph whether the person works more...
Suppose that you can earn $16 per hour before taxes and can work up to 80...
Suppose that you can earn $16 per hour before taxes and can work up to 80 hours per week. Consider two income tax rates, 10% and 20%. a. On the same diagram, draw the two weekly consumption-leisure budget constraints reflecting the two different tax rates. b. Draw a set of representative indifference curves such that the income effect of the tax increase outweighs the substitution effect. c. Draw a set of representative indifference curves such that the substitution effect of...
10 10. The above diagram illustrates an indifference curve and two b udget lines for the...
10
10.
The above diagram illustrates an indifference curve and two
b
udget lines for the same
worker. The thick line
is with a Universal Basic Income (UBI) p
rogram, while the thin
line is without such a program. (The two lines coincide for
con
sumption values above
$300.) The worker has 100 hours per week to allocate between
wo
rk and leisure, and faces
the market wage of $10 per hour. Without the program, the
worke
r chooses 38...
Question 1: People decide how to “budget” their time in much the same way that they...
Question 1: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. a. How might we model this trade-off economically using the basic labor supply model...
Question 1: People decide how to “budget” their time in much the same way that they...
Question 1: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. a. How might we model this trade-off economically using the basic labor supply model...
Question 4: People decide how to “budget” their time in much the same way that they...
Question 4: People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week. How might we model this trade-off economically using the basic labor supply model by...
Suppose you have 24 hours per day that you can allocate between leisure and working (i)...
Suppose you have 24 hours per day that you can allocate between leisure and working (i) Draw the budget constraint between “leisure hours” on the horizontal axis and “wage income” on the vertical when the wage rate is $40 per hour. Mark an optimum point A that is meaningful. Draw a new budget constraint when the wage rate falls to $30 per hour. Show a new optimum point B. (ii) On your indifference curve diagram, decompose the effect of the...
Individual X and Y work 10 and 6 hours a day, respectively. Their hourly wage is...
Individual X and Y work 10 and 6 hours a day, respectively. Their hourly wage is $8 per hour. If their wage goes up to $10 per hour, individual X and Y adjust their hours of work as 12 and 5 hours a day, respectively. (Assume that both individuals faces the same 16 hours constraint in a day) (a) (5 points) What can you tell about their indifference curves? (e.g flat or steep) Explain briefly what your answer implies about...
3. What happens to the reservation wage if nonlabor income increases, and why? You should include...
3. What happens to the reservation wage if nonlabor income increases, and why? You should include graphs with your answer 4. What happens to hours of work when the wage rate falls? Decompose the change in hours of work into income and substitution effects. 5. Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 168 hours. Her utility function is UCL) = CXL. This functional form implies that the...
Pat's wage rate is $6 per hour and she has a maximum of 100 hours per week to allocate between leisure and work. Without any welfare assistance program, Pat chooses to work 37.5 hours per week. a. Suppose Pat is eligible for welfare benefits of $225 per week, but benefits are reduced $1 for every $1 she earns. Draw the budget line (label all relevant values) and indifference curve that represents Pat's maximum utility under these circumstances. b. The structure...
10
10.
The above diagram illustrates an indifference curve and two
b
udget lines for the same
worker. The thick line
is with a Universal Basic Income (UBI) p
rogram, while the thin
line is without such a program. (The two lines coincide for
con
sumption values above
$300.) The worker has 100 hours per week to allocate between
wo
rk and leisure, and faces
the market wage of $10 per hour. Without the program, the
worke
r chooses 38...
3. What happens to the reservation wage if nonlabor income increases, and why? You should include graphs with your answer 4. What happens to hours of work when the wage rate falls? Decompose the change in hours of work into income and substitution effects. 5. Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 168 hours. Her utility function is UCL) = CXL. This functional form implies that the...
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