Homework Help is Here – Start Your Trial Now!
Business
Economics
4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down?

4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question

PLEASE ANSWER QUESTION 4

Section one-theory A: Key concepts 1. What is the marginal rate of substitution? 2. Can Giffin goods also be normal goods? B: Theory: Labour supply For the following three questions, assume that leisure is a normal good. 3. A worker has a wage of £10 an hour, and chooses to work eight hours a day. Represent this decision in a suitably labelled graph. (Assume convex preferences) 4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down? 5. Return to the scenario in question 3. The worker's wage increases from £10 an hour to £12. Assuming that the substitution effect dominates the income effect, would hours worked go up or down? Show these two effects in a suitably labelled graph. (Change in hours don't need to be specific – it is the direction we care about here.) Section two-theory and policy C: Payday loans 6. Samson can choose between two goods: consumption this week, and consumption next week. His income is £200 this week and their income next week is £200. He can just put this week's money under their mattress for the future. Alternatively, he can borrow £190 and pay back £200 next week. Show Samson's budget set in a suitably labelled graph. 7. The government bans all payday loans. Show the effect on Samson's budget set. 8. Assume that Samson was a borrower before the change. Would this policy make him better or worse off (i.e. happier.) Explain. Section three - the interpretation of policy D: Three strikes laws 9. Proponents of "three strikes" laws argued that, to reduce criminality one need only make it costlier. The policy gave very long sentences to people who committed a third crime, regardless of how minor. Analyse this policy, assuming that criminals care for (i) monetary proceeds of crime and (ii) years of liberty. Available evidence shows that the policy was ineffective in reducing the incidence of crime. What kind of good would you say 'proceeds of crime' are?
Transcribed Image Text:Section one-theory A: Key concepts 1. What is the marginal rate of substitution? 2. Can Giffin goods also be normal goods? B: Theory: Labour supply For the following three questions, assume that leisure is a normal good. 3. A worker has a wage of £10 an hour, and chooses to work eight hours a day. Represent this decision in a suitably labelled graph. (Assume convex preferences) 4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down? 5. Return to the scenario in question 3. The worker's wage increases from £10 an hour to £12. Assuming that the substitution effect dominates the income effect, would hours worked go up or down? Show these two effects in a suitably labelled graph. (Change in hours don't need to be specific – it is the direction we care about here.) Section two-theory and policy C: Payday loans 6. Samson can choose between two goods: consumption this week, and consumption next week. His income is £200 this week and their income next week is £200. He can just put this week's money under their mattress for the future. Alternatively, he can borrow £190 and pay back £200 next week. Show Samson's budget set in a suitably labelled graph. 7. The government bans all payday loans. Show the effect on Samson's budget set. 8. Assume that Samson was a borrower before the change. Would this policy make him better or worse off (i.e. happier.) Explain. Section three - the interpretation of policy D: Three strikes laws 9. Proponents of "three strikes" laws argued that, to reduce criminality one need only make it costlier. The policy gave very long sentences to people who committed a third crime, regardless of how minor. Analyse this policy, assuming that criminals care for (i) monetary proceeds of crime and (ii) years of liberty. Available evidence shows that the policy was ineffective in reducing the incidence of crime. What kind of good would you say 'proceeds of crime' are?
Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Union Wage
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS