Karen is a single mother with one child. She has T=90 hours per week of free time but zero non-labor income. She faces a market wage rate of w=$5...
View the step-by-step solution to:

Question

Karen is a single mother with one child. She has T=90 hours per week of free time but zero non-labor income. She

faces a market wage rate of w=$5 (per hour). Currently, the government has a child benefit program which provides $100 per week for eligible parents with children. Karen is eligible for this benefit, but the program design is such that the benefit is deducted to zero once she begins working.

a) Write down Karen's budget constraint under the current child benefit program. Graphically illustrate her budget constraint on a consumption-leisure graph.

only has T1=50 hours of free time. Recalculate Jeff's optimal choice of consumption and leisure

Jeff's wages affects his indifference curve, budget constraint, and optimum. How does Jeff's working hours change compared to the first case where he was healthy and earned $25 per hour?

Hint: Notice that Karen's budget constraint consists of two parts: when she is receiving benefits and when she is not. Also, notice that her benefit receipt is conditional on her working hours.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes