Question 3Suppose it costs K dollars per year to pay for childcare. Suppose the government introduces a subsidy thatreduces the cost to K’.a) Graph the budget constraint without the policy (without the cost subsidy), illustrating on the graphthe role of K (the daycare cost), the weekly market wage rate w, weekly hours and assume theindividual already possesses a yearly non labour income YN and it is positive. On the same graph,illustrate the change in the budget constraint once the subsidy is introduced.b) Show graphically if and how the subsidy will affect the labour supply. Make sure you provide acomplete answer including considerations of labour supply at the extensive and intensive margins(corner and interior solutions) before and after the daycare subsidy.

The Budget Constraint is defined as the combination of goods that can be purchased by an individual…

Answered: Suppose it costs K dollars per year to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Sally believes that any market basket on the income-consumption curve shares the same marginal rate of substitution. Do you agree with Sally? Why?
Refer to the following diagram. Point A is 24 hours, C is 14 hours, D is 8 hours, and E is 6 hours. Income B₂ 0 D -Leisure If the current wage rate results in a budget constraint of AB2, how many hours will the individual work?
(a) Carlos has 168 hours per week to divide between labour and leisure. For his job, Carlos is allowed to work up to 60 hours a week earning a wage of $25, but faces a payroll tax of 20%. Given these constraints, Carlos chooses to work 40 hours per week. Graph the budget constraint and indicate the optimal choice, make sure to label all important points. (b) The government proposes a universal basic income whereby everyone is given $200 a week, which is financed by increasing the payroll tax to 40%. Add this new budget constraint to your diagram from (a). Be sure to show all your work/calculations, and label all important points. Is this likely to increase or decrease labour supply for Carlos? Carefully explain. (It is important that you carefully draw your diagram for this question, and compare it to the one in (a)).
QUESTION 35 Following from the model described in the previous question. What is the budgt constraint facing the individual, and what is the optimal condition for individual choices of consumption and fertility? 1 The budget constraint is wt- pn; = C;i The optimal condition is Ct pnt 1 The budget constraint is w, -p= C;; The optimal condition is Ct nt 1 The budget constraint is Wt-p3 Ct; The optimal condition is Ct %3D The budget constraint.is w -p-n;= C; The optimal condition is Ct = Opn;
Using the utility function and wage constraint in the problem, please complete the utility maximization problem using the substituion and Lagrangian method. If you can not do both, I would prefer the substitution method.
Jones, without a job or job prospects, has been on social assistance for the past four months. Social assistance pays a basic benefit of $600 a month with a benefit reduction rate of 75 percent for earned income. Her welfare benefit is given as B = 600 - 0.75E, where E represents monthly earnings. Jones has just been offered a part-time job working 5 hours a day, 5 days a week, earning an hourly wage of $11. Sketch a budget constraint for Jones given the social assistance scheme in place and the wage rate available for part time work. How much income would she earn if she accepted the job? Would Jones still be on social assistance if she took the job? Draw the budget constraint.
Each day, Luke must decide his leisure hours, L, and his consumption, C. His utility function is given by the following equation U(L, C) = (C – 30)(L – 12). Luke receives $50 welfare payment per day. Show all the steps, with definition of every new notation used in the steps. a) Suppose that Luke's hourly wage is $5. Find Luke's daily budget constraint equation and graph it. b) If Luke's wage is $5 per hour worked, what is Luke's optimal consumption, (L*, C*)? · c) Assume that the wage is an unknown variable, w. What is Luke's leisure demand L(w)?- d) What is Luke's reservation wage, the lowest wage Luke is willing to work for? -
Consider an economy with 100 identical households and 100identical firms. Each household is endowed with one unit of time. Half of the households are endowed with equal shares of firm, while the rest areendowed with no firm shares. A householdís utility is u (x; r) = 2 ln(x*r^2) ,where x is consumption of goods, r = 1- l is leisure time and l is thehouseholdís labour supply. Each firm hires households to produce goodsaccording to technology y = L^1/2, where L denotes the labour input. Goodsprice p, wage rate w, and dividend income are all taken as given. Normalizew = 1. Do the following: (a) Derive the Marshallian demands, x (p, D) andr (p,D), where D is dividend. (b) Derive the firmís input demand functionL (p) and profit function pi(p). (c) List all the market-clearing conditions.(d) Calculate the equilibrium price p
Because Income depends on work effort and work effort depends on nutrition, suppose the relationship between income (Y) and total food availability (F) in a poor household is given by: Y = 10F + 20F2 – 0.6F3 a) If food availability in a two-person household is 20, would it be “rational” to share the food? Explain. b) If food availability in a two-person household is 30, would it be “rational” to share the food? Explain.
Mark can work up to 80 hours each week at a pre-tax hourly wage of $20 but faces a constant 20 percent tax on his earnings. Thus, Mark maximizes his utility by choosing to work 50 hours per week. The government proposes a negative income tax whereby everyone is given $300 per week and anyone can supplement their income further by working. To pay for the negative income tax, tax on earnings will be increased to 50 percent. On a single graph, draw Mark's original budget line and his budget line under the negative income tax. Show that Mark will work fewer hours if the negative income tax is implemented Will Mark's utility be greater under the negative income tax? Discuss your answer.
QUESTION 7: Budget constraints Everyone is endowed with 168 hours in a week (24X7). If you work 40 hours or less, you w=$20 per hour. If you work overtime, you earn w-$25. Assume the worker has M= non-labor income and that the price of the consumption good is p. Draw the budget constraint. Label the intercepts and the slopes in both the overtime and non-overtime region.
On average, people sleep 8 hours per day meaning that each individual has 16 hours per day to allocate between labour and leisure. Assuming that the wage rate is $15 per hour and there are non-labor income is zero. The utility function of an individual is given by U(Y, L) = YL and for simplicity, the price index for real income is 1. a. Determine the budget constraint. b. Determine the marginal rate of substitution. c. What are the optimal labor and leisure hours? d. At the optimal relationship, what is the utility level for the individual?

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