The point where the budget constraint and an indifference curve are tangent Video
Indifference Curves and Budget Constraints the point where the budget constraint and an indifference curve are tangentNavigation menu
Make sure all names are on all pages of the answer sheet. This problem set is worth 24 points double the 1st problem set. Total Percent of population Number Percent of labor forceA Marginal tax rates. Look up the federal minimum wage for years you can find this many places, including the Bureau of Labor Statistics BLS. Now, assume a single adult worker earned the minimum wage and worked 40 hours a week for 50 weeks a year from January 1, through December 31, Assume here that the change took place on January 1st in each year. Label both axes with values and titles.
Call this Line A. Assume that Jamaal is a leisure lover and at his preferred bundle he works for 10 hours. Label this point A and draw an indifference curve for this bundle labeled UA. How much does he earn? Re-draw his budget constraint on the same graph and label it Line B.
What effect will this cost likely have on the amount of labor Jamaal supplies assuming both consumption and leisure are normal goods?
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Talk about this in terms of income and substitution effects. If Jamaal preferred to work 10 hours in the case of no child care costs, how many hours do you think he will work now? Will he work more, less or the same? Explain why.
Assume that the structure of EITC is as follows: 1. Now, on the same graph, draw her budget constraint before EITC legislation was enacted i.
That is, at how many weeks of work does the phase-in end; what will our worker earn? At how many weeks of work does the phase-out begin and end; how much does our worker earn at each point? Draw an indifference curve showing this point and label the curve UN and the point N. Now draw another indifference curve for the same worker assuming that EITC legislation has just passed. Show this and say why. Page 2 Page 3. Your email address will not be published.
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