Marley has 100 hours per week available she can spend either working or doing leisure activities. He can work at a wage rate of $50 per hour. Bob receives $1000 of rental income per week, no matter how much he works. Use leisure-income model to solve this:- i) draw Marley budget line and optimal choice of working 80 hours in a week then calculate the maximum and optimal amount of income ii.) And suppose Marley is suppose to share the household expenses and then be taxed 50% of her wage income. then draw another diagram to compare Marley choice in Part i) and the new labour supply decision of working 90 hours per week due to the tax. Clearly label out the income effect, substitution effect and total effect in the diagram.
Marley has 100 hours per week available she can spend either
working or doing leisure activities. He can work at a wage rate of $50 per hour. Bob receives
$1000 of rental income per week, no matter how much he works.
Use leisure-income model to solve this:-
i) draw Marley budget line and optimal choice of working 80 hours in a week then calculate the maximum and optimal amount of income
ii.) And suppose Marley is suppose to share the household expenses and then be taxed 50% of her wage
income. then draw another diagram to compare Marley choice in Part i) and the new labour supply decision of working 90 hours per week due to the tax. Clearly label out the income effect, substitution effect and total effect in the diagram.
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