2. Use the budget constraint to replace c in the first-order condition to obtain a singleequation that relates the household's choice of I to w and T.3. Suppose that the government uses all the tax revenue to hire emergency front-linehealth workers to help during the COVID-19 pandemic. The government pays theseworkers the prevailing wage rate. How much time (in units) can the government affordto purchase from the workers? Denote this number by m. An economy is populated by a representative household with the following preferences:u(c) +v(l),where consumption is c and I is leisure. The household has 1 unit of time so its budget isc=w(1-1)-T,where w is the wage rate and r is a tax that the government collects. Notice that 7 is alump-sum tax, not an income tax: the household must pay the same amount regardless ofhow much income it earns.1/₂T1"IViFigure 1: Consumption across two periods

The budget line can be defined as the curve which represents the combination of two goods that the…

2. Use the budget constraint to replace c in the first-order condition to obtain a single equation that relates the household's choice of I to w and 7. 3. Suppose that the government uses all the tax revenue to hire emergency front-line health workers to help during the COVID-19 pandemic. The government pays these workers the prevailing wage rate. How much time (in units) can the government afford to purchase from the workers? Denote this number by m.

2. Use the budget constraint to replace c in the first-order condition to obtain a single equation that relates the household's choice of I to w and 7. 3. Suppose that the government uses all the tax revenue to hire emergency front-line health workers to help during the COVID-19 pandemic. The government pays these workers the prevailing wage rate. How much time (in units) can the government afford to purchase from the workers? Denote this number by m.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section6.A: Indifference Curve Analysis

Problem 2SQP

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Why does a change in income cause a parallel shift in the budget constraint?
2. Suppose W-$15/hr. I income per week. N-hours of leisure per week. a. Find the equation of the income/leisure budget constraint. b. Graph the budget constraint. c. Find the weekly income of someone who chooses 15 hours of leisure per day. d. Suppose that by some miracle the number of hours in the day increased from 24 to 30 hours. Would this change the budget constraint? If your answer is yes, how would the budget constraint change. %3D
5. Rhoda’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) × (L - 40). There are 110 (non-sleeping) hours in the week available to split between work and leisure. Rhoda earns 10 GHS per hour after taxes. She also receives 320 GHS worth of support from her parents each week regardless of how much she works.a. What will be Rhoda’s marginal utility of leisure and her marginal utility of consumption?b. What is Rhoda’s marginal rate of substitution when L = 100 and she is on her budget line?c. Find Rhoda’s optimal amount of consumption
5. Rhoda’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) × (L - 40). There are 110 (non-sleeping) hours in the week available to split between work and leisure. Rhoda earns 10 GHS per hour after taxes. She also receives 320 GHS worth of support from her parents each week regardless of how much she works.a. What will be Rhoda’s marginal utility of leisure and her marginal utility of consumption?b. What is Rhoda’s marginal rate of substitution when L = 100 and she is on her budget line? c. Find Rhoda’s optimal amount of consumption.
Suppose that a person has 2000 hours to allocate each year between leisure and work. a. Derive the equation of his budget constraint given an hourly wage of $(15)/hour. b) Graph his budget constraint line based on the equation you derived in part a. (Consumption (C) on the vertical axis and leisure (L) on the horizontal axis). Please make sure to include the value for the vertical and horizontal intercepts. c) Now suppose that the local government introduces an income guarantee program for single parents in which the income transfer is $10,000 per year if an individual does not work during that year (this dollar amount represents the benefit guarantee). If the individual decides to work, this transfer program imposes a 100% benefit reduction rate (e. g.. each additional hourly wage earned is reduced by 100%). Derive the new budget constraint equation that corresponds to this scenario. d) Draw the budget line that corresponds to the new scenario on a new graph. (Consumption (C) on the…
b. Mary has two dinner options available: eating a home cooked meal for $150 permeal, or at a restaurant for $260 per meal. Her weekly budget is $2500.iv. Suppose the price of a home cooked meal increases to $200 and incomeincreases to $4200. Show the impact of the new budget line relative to theoriginal budget line. What would be the new marginal rate of substitutionthat corresponds to the optimal consumption choice? Interpret themarginal rate of substitution
Sameena works as a free-lance worker at a software house in Rawalpindi. Supposeshe keeps awake for 110 hours a week. Also suppose that part of this time she canspend on earning money doing this job and using it for her consumption, and the restof the time she can spend on her leisure not earning money. At first she earns Rs.550for every hour she works. Draw a figure showing Saima’s budget constraint, herindifference curve for consumption and leisure and her optimum.
Teresa spends her entire scholarship of PLN 600 for the purchase of drinks and food. 1. Draw Teresa's budget restraint line knowing that her favorite drink costs 5 zlotys per bottle and the dinner price is 20 zlotys. 2. How will Teresa's situation be affected by the increase in dinner price to PLN 25? 3. What will happen if the price of the drink is reduced to PLN 2.5? 4. Assess following quantitative combinations: •125 drinks i 20 dinners •80 drinks i 20 dinners •40 drinks i 20 dinnes
Could you please assist Q1. Terin works as a motor car mechanic and earns K1200/fortnight. Assuming he strictly allocates his income between food and clothes. The average food consumption price is K12/kg per fortnight and average clothes purchasing price is K20/piece per fortnight. iii. iv. V. Complete the budget schedule below. Baskets/Combinations Food/kg fortnight Cloth pieces/fortnight A 0 B 12 C 24 D 36 E 48 F 60 Assuming the price of food fell to K8/kg per fortnight while the income, price and quantity of clothes purchased remained unchanged (as in 6iii above). Draw a new schedule showing this change. Draw a budget line for the budget schedules (6iii &iv) above and label correctly.
Assume that a person earns $10 per hour and her non-labor income increases from $100 to$200. She also has 110 hours a week to decide either to work or leisure. a. Draw a budget constraint of this person.b. Draw an indifference curve to show the income and substitution effect of change innon-labor income. HINT: you can draw two separate graphs to show the effect ofsubstitution and income effects.
2. Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. a. Draw Leandro's time allocation budget line for a typical day. Then illustrate the indifference curve at his optimal choice. b. Now Leandro's wage rate falls to $10. c. Draw Leandro's new budget line. d. Suppose that Leandro now works only 4 hours as a result of his reduced wage rate. Illustrate the indifference curve at his new optimal choice.
Rich's Opportunities. Rich has no nonlabor income, and suppose the price of consumption is $1 per unit. Rich earns $15 per hour, and he has 16 hours in the day to allocate between working and leisure time. The figure be depicts his budget line. consumption (units/day) 240 210 180 150 120 90 60 30 0. 21 4. 6. 8. 10 12 14 16 leisure (hours/day) Rich is thrilled to learn that his folks will give him a $10 daily allowance starting tomorrow. What happens to Rich's opportunities tomorrow? O a. Rich's endowment point shifts left $10. Ob. His budget line shifts up 10 units of consumption per day. O c. The slope of Rich's budget line increases (in absolute value) $10 per day. O d. The slope of Rich's budget line decreases (in absolute value) $10 per hour.