Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate of 40%. A person can work up to 2,000 hours per year at $10 per hour. a. Draw the person’s budget constraint with the income guarantee. b. Suppose that the income guarantee rises to $7,500 but with a 60% reduction rate. Draw the new budget constraint c. Which of these two income guarantee programs is more likely to discourage work? Explain.
Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate of 40%. A person can work up to 2,000 hours per year at $10 per hour. a. Draw the person’s budget constraint with the income guarantee. b. Suppose that the income guarantee rises to $7,500 but with a 60% reduction rate. Draw the new budget constraint c. Which of these two income guarantee programs is more likely to discourage work? Explain.
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN:9780078747663
Author:McGraw-Hill
Publisher:McGraw-Hill
Chapter7: Demand And Supply
Section7.1: Demand
Problem 5R
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Consider an income guarantee program with an income guarantee of $5,000 and a benefit reduction rate of 40%. A person can work up to 2,000 hours per year at $10 per hour.
a. Draw the person’s budget constraint with the income guarantee.
b. Suppose that the income guarantee rises to $7,500 but with a 60% reduction rate. Draw the new budget constraint
c. Which of these two income guarantee programs is more likely to discourage work? Explain.
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