Suppose that for every hour worked in the labour market, single mothers use an hour of childcare, and the hourly childcare cost is π pounds. The members of Parliament are interested in evaluating the impact of two different policies: Policy 1: provides single mothers with a lump sum benefit. Policy 2: provides single mothers with a fixed tax cut for every pound earned. What are the impacts of these two policies on labour supply (hours worked and participation rates) of single mothers in the UK (United Kingdom)? Do you expect the impact of these two policies to be different? Why? (400 words)
Suppose that for every hour worked in the labour market, single mothers use an hour of childcare, and the hourly childcare cost is π pounds. The members of Parliament are interested in evaluating the impact of two different policies: Policy 1: provides single mothers with a lump sum benefit. Policy 2: provides single mothers with a fixed tax cut for every pound earned. What are the impacts of these two policies on labour supply (hours worked and participation rates) of single mothers in the UK (United Kingdom)? Do you expect the impact of these two policies to be different? Why? (400 words)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that for every hour worked in the labour market, single mothers use an hour of childcare, and the hourly childcare cost is π pounds.
The members of Parliament are interested in evaluating the impact of two different policies:
- Policy 1: provides single mothers with a lump sum benefit.
- Policy 2: provides single mothers with a fixed tax cut for every pound earned.
What are the impacts of these two policies on labour supply (hours worked and participation rates) of single mothers in the UK (United Kingdom)?
Do you expect the impact of these two policies to be different? Why? (400 words)
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