ecn431

# ecn431 - 50.50 At how many hours worked will she not be...

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TANF Program and Individual Labor Supply Example taken from text : Suppose a single mother in NYS can make \$10/hour working, and the maximum number of hours she can work yearly is 2000. She faces a trade-off: work vs. staying home with her children. Her utility increase with more time spent with her children (i.e. utility decreases with work—work is a bad). However, work enables her to buy more consumption goods. A. Given the information above, graph her budget constraint. Write an equation for her budget constraint. B. Suppose the TANF program in NYS has a benefit guarantee of \$5000 and a reduction rate of
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Unformatted text preview: 50% (.50). At how many hours worked will she not be eligible for TANF benefits? How does the TANF program change the single mother’s single mother’s budget constraint . Show on your graphs from part A. Write equations representing her budget constraint. C. Suppose the single mother’s utility function is: U=100 x ln(C) + 175 x ln(L). How is her labor supply (# hours worked) affected by the introduction of the TANF program? Does this result generalize to all TANF recipients? Explain....
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