Title Sarah has 1,000 hours per year she can allot to work or leisure (1). If she works, she gets a wage.. Description Sarah has 1,000 hours per year she can allot to work or leisure (1). If she works, she gets a wage of $16/hour. Food (f) costs $1 per unit (P,-$1). What is the price of leisure P1? Give an intuitive explanation for what the price of leisure means a) b) Draw Sarah's budget constraint. Now suppose Sarah enrolls in TANF, and there is a benefit reduction rate of 0.5 and a benefit guarantee of $2,000. Write out the equation for the income she could receive from TANF if she enrolled. Draw her new budget constraint. What is her new effective wage if she participates in TANF? c) d) Suppose that the government decides to reduce the benefit reduction rate to 0.25 to encourage work (benefit guarantee remains the same). Draw the new budget constraint. e) Draw examples of indifference curves for a single mother who participates in TANF both before and after the reform. Display the substitution and income effects for leisure on the x-axis (no numbers necessary). What is the direction of the overall effect?

Title Sarah has 1,000 hours per year she can allot to work or leisure (1). If she works, she gets a wage.. Description Sarah has 1,000 hours per year she can allot to work or leisure (1). If she works, she gets a wage of $16/hour. Food (f) costs $1 per unit (P,-$1). What is the price of leisure P1? Give an intuitive explanation for what the price of leisure means a) b) Draw Sarah's budget constraint. Now suppose Sarah enrolls in TANF, and there is a benefit reduction rate of 0.5 and a benefit guarantee of $2,000. Write out the equation for the income she could receive from TANF if she enrolled. Draw her new budget constraint. What is her new effective wage if she participates in TANF? c) d) Suppose that the government decides to reduce the benefit reduction rate to 0.25 to encourage work (benefit guarantee remains the same). Draw the new budget constraint. e) Draw examples of indifference curves for a single mother who participates in TANF both before and after the reform. Display the substitution and income effects for leisure on the x-axis (no numbers necessary). What is the direction of the overall effect?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter2: Career Planning

Section: Chapter Questions

Problem 5LTAI

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