Suppose that Richard has recently successfully undergone a medical procedure which has cleared him of the disability. He can now earn $15 per hour. This means that Richard can now make $30,000 if he works 2000 hours per year. Move the budget constraint to illustrate the change in Richard's circumstances.

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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The graph below illustrates the situation of Richard, a disabled worker who can currently make $5 per hour given his health
constraints. The budget constraint shows the trade off between income and leisure for Richard - at zero hours of leisure and
2, 000 hours of work, the maximum amount of income Richard can make is $10, 000 ($5 × 2, 000 hours). At the other
extreme of the budget constraint line, if Richard would work zero hours, he will earn zero income, but enjoy 2, 000 hours of
leisure. Richard has only 2000 hours available to either work or enjoy as leisure.
Currently, a government antipoverty program guarantees each individual $11, 000 in income per year. With this program,
each time an individual earns $1, 000, the government will deduct $1, 000 of its support. Given that the Government
Support line lies entirely above Richard's budget constraint, we can conclude that Richard is most likely living entirely on
government support and sees no financial benefit from working any hours.
Suppose that Richard has recently successfully undergone a medical procedure which has cleared him of the disability. He
can now earn $15 per hour. This means that Richard can now make $30,000 if he works 2000 hours per year. Move the
budget constraint to illustrate the change in Richard's circumstances.
Provide your answer below:
35000
%24
30000-
25000-
20000-
15000-
Government Support ($11000)
10000
|(0, 10000)
5000-
(2000 0)
1000
2000
Leisure (Hours)
-500
500
1500
2500 3000
Income ($)
Transcribed Image Text:The graph below illustrates the situation of Richard, a disabled worker who can currently make $5 per hour given his health constraints. The budget constraint shows the trade off between income and leisure for Richard - at zero hours of leisure and 2, 000 hours of work, the maximum amount of income Richard can make is $10, 000 ($5 × 2, 000 hours). At the other extreme of the budget constraint line, if Richard would work zero hours, he will earn zero income, but enjoy 2, 000 hours of leisure. Richard has only 2000 hours available to either work or enjoy as leisure. Currently, a government antipoverty program guarantees each individual $11, 000 in income per year. With this program, each time an individual earns $1, 000, the government will deduct $1, 000 of its support. Given that the Government Support line lies entirely above Richard's budget constraint, we can conclude that Richard is most likely living entirely on government support and sees no financial benefit from working any hours. Suppose that Richard has recently successfully undergone a medical procedure which has cleared him of the disability. He can now earn $15 per hour. This means that Richard can now make $30,000 if he works 2000 hours per year. Move the budget constraint to illustrate the change in Richard's circumstances. Provide your answer below: 35000 %24 30000- 25000- 20000- 15000- Government Support ($11000) 10000 |(0, 10000) 5000- (2000 0) 1000 2000 Leisure (Hours) -500 500 1500 2500 3000 Income ($)
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