Economics Homework Help

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?