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In New Zealand, the Family Tax credit (FTC) gives a working mother with one child $113 if her weekly earnings are between $0 to $820. For each additional dollar earned above $820, the tax credit decreases by 25 cents. Consider a working mother with one child in New Zealand. Her wage rate is $30 per hour, and the maximum hours she can work is 80 hours per week. a) Draw her budget line without the FTC. What is the slope of the budget line? b) Draw her budget line with the FTC. What are the slopes of the new budget line? (Please specify the slopes of each segment of the budget line.) c) Where does the new budget line intersects with the initial budget line? What are her income and hours of work at the intersection? d) Suppose the working mother works 25 hours per week under the original budget constraint without the FTC. Will she work more, less, or ambiguous after the introduction of the FTC? Draw a figure and explain you answer in terms of income and substitution effect.

In New Zealand, the Family Tax credit (FTC) gives a working mother with one child $113 if her weekly earnings are between $0 to $820. For each additional dollar earned above $820, the tax credit decreases by 25 cents. Consider a working mother with one child in New Zealand. Her wage rate is $30 per hour, and the maximum hours she can work is 80 hours per week. a) Draw her budget line without the FTC. What is the slope of the budget line? b) Draw her budget line with the FTC. What are the slopes of the new budget line? (Please specify the slopes of each segment of the budget line.) c) Where does the new budget line intersects with the initial budget line? What are her income and hours of work at the intersection? d) Suppose the working mother works 25 hours per week under the original budget constraint without the FTC. Will she work more, less, or ambiguous after the introduction of the FTC? Draw a figure and explain you answer in terms of income and substitution effect.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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just subparts a, b and c please 

In New Zealand, the Family Tax credit (FTC) gives a working mother with one child $113 if her weekly earnings are between $0 to $820. For each additional dollar earned above $820, the tax credit decreases by 25 cents. Consider a working mother with one child in New Zealand. Her wage rate is $30 per hour, and the maximum hours she can work is 80 hours per week. a) Draw her budget line without the FTC. What is the slope of the budget line? b) Draw her budget line with the FTC. What are the slopes of the new budget line? (Please specify the slopes of each segment of the budget line.) c) Where does the new budget line intersects with the initial budget line? What are her income and hours of work at the intersection? d) Suppose the working mother works 25 hours per week under the original budget constraint without the FTC. Will she work more, less, or ambiguous after the introduction of the FTC? Draw a figure and explain you answer in terms of income and substitution effect.
Transcribed Image Text:In New Zealand, the Family Tax credit (FTC) gives a working mother with one child $113 if her weekly earnings are between $0 to $820. For each additional dollar earned above $820, the tax credit decreases by 25 cents. Consider a working mother with one child in New Zealand. Her wage rate is $30 per hour, and the maximum hours she can work is 80 hours per week. a) Draw her budget line without the FTC. What is the slope of the budget line? b) Draw her budget line with the FTC. What are the slopes of the new budget line? (Please specify the slopes of each segment of the budget line.) c) Where does the new budget line intersects with the initial budget line? What are her income and hours of work at the intersection? d) Suppose the working mother works 25 hours per week under the original budget constraint without the FTC. Will she work more, less, or ambiguous after the introduction of the FTC? Draw a figure and explain you answer in terms of income and substitution effect.
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