Suppose a Worker Gets a Weekly Check Equal to $1,000

question 4

Essay

Suppose a worker gets a weekly check equal to $1,000 from a risk-free investment, has 60 hours of weekly leisure that can be devoted to work and can earn a wage of $40 per hour.
a.Illustrate this worker's budget constraint, with weekly leisure hours on the horizontal and weekly consumption (in dollars) on the vertical.b Illustrate what happens to this worker's budget constraint when the weekly investment check increases to $1,500.
c.Illustrate what happens to this worker's budget constraint when instead the wage increases to $50 per hour.
d.Suppose the worker can hire help at $20 per hour, and each hour of help adds a half an hour to his available leisure.Will the budget constraint described in (a) change?

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Definitions:

Transfer Payments

Payments made by the government to individuals through various social benefit programs, without the government receiving any goods or services in return.

Government Purchases

Expenditures by the government for goods and services that directly satisfy public consumption or are invested in public infrastructure.

Taxes

Taxes are compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Fiscal Policy

Government adjustments in spending levels and tax rates to monitor and influence a nation's economy.