Assume you have been laid off from your job and withdrew from the labor market. You have zero non-labor income. If you did supply labor to the market, you could earn $7.25 per hour. There are 110 non-sleeping hours available during a week. a. Draw the budget constraint and indifference curve that depicts the situation described above. b. Because you were laid-off from your job, you qualify for unemployment insurance (UI). In Wisconsin, you could earn $370 per week without working. If you do choose to work, your labor earnings are taxed at 67%. Furthermore, under state law, you could work up to 31 hours during the week and still receive UI. Show how this UI program alters your budget constraint. c. Would the UI program described in part (b) alter your decision to supply labor to the market? Why or why not?
Assume you have been laid off from your job and withdrew from the labor market. You
have zero non-labor income. If you did supply labor to the market, you could earn $7.25
per hour. There are 110 non-sleeping hours available during a week.
a. Draw the budget constraint and indifference curve that depicts the situation
described above.
b. Because you were laid-off from your job, you qualify for unemployment
insurance (UI). In Wisconsin, you could earn $370 per week without working. If
you do choose to work, your labor earnings are taxed at 67%. Furthermore, under
state law, you could work up to 31 hours during the week and still receive UI.
Show how this UI program alters your budget constraint.
c. Would the UI program described in part (b) alter your decision to supply labor to
the market? Why or why not?
Step by step
Solved in 4 steps with 1 images
