[SOLVED] Labor Supply Practice Problem
I've tried drawing the budget constraints for part a, but I just can't get them right. Any tips?
A program provides cash assistance of $600 when the head of the household works at least 120 hours a month and when their monthly income (income from working) doesn't exceed a set limit.
Consider a single parent family. Previously, monthly earnings for a single parent family had to be less than $1,500 to receive benefits from the program. Monthly limits on earnings were expanded to $2,500 for a single parent family.
a. Assume that the parent in a single parent family could earn $10 an hour. Plot the individual's monthly leisure income budget constraint if the limit of earnings is $1,500 and plot the individual's monthly leisure income budget constraint if the limit of earnings is $2,500.