4. Now suppose that, instead of taxing citizens to hire health-care workers, the govern- ment imposes compulsory health-care training and service: the representative house- hold has to dedicate m units of time to administer vaccines, unpaid. The rest of their time is available to use as they please and no taxes are imposed. Set up the household's optimisation problem under this policy. 5. Show that the representative household's level of consumption, leisure, hired health- care labour and compulsory health-care labour are the same under both policies. Ex- plain.
4. Now suppose that, instead of taxing citizens to hire health-care workers, the govern- ment imposes compulsory health-care training and service: the representative house- hold has to dedicate m units of time to administer vaccines, unpaid. The rest of their time is available to use as they please and no taxes are imposed. Set up the household's optimisation problem under this policy. 5. Show that the representative household's level of consumption, leisure, hired health- care labour and compulsory health-care labour are the same under both policies. Ex- plain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:4. Now. suppose that, instead of taxing citizens to hire health-care workers, the govern-
ment imposes compulsory health-care training and service: the representative house-
hold has to dedicate m units of time to administer vaccines, unpaid. The rest of their
time is available to use as they please and no taxes are imposed. Set up the household's
optimisation problem under this policy.
5. Show that the representative household's level of consumption, leisure, hired health-
care labour and compulsory health-care labour are the same under both policies. Ex-
plain.
Transcribed Image Text:3 Supply side
An economy is populated by a representative household with the following preferences:
u(c) +v(l),
where consumption is c and lis leisure. The household has 1 unit of time so its budget is
c=w(1-1)-T,
where w is the wage rate and r is a tax that the government collects. Notice that 7 is a
lump-sum tax, not an income tax: the household must pay the same amount regardless of
how much income it earns.
1/₂
T
1
"
I
Vi
Figure 1: Consumption across two periods
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