Consider the labor supply model we studied in chapter 6. An individual has 16 hours per day available. His non-labor income = 0. He can work for $5 per hour. Draw the budget line in the following scenarios. Use the numbers in the main part of the question, and apply the changes in each part separately. That is, the changes in part b do not apply to part c, and the changes in part c do not apply to part d, and so on.
a. Draw the original budget line.
b. = $20. c. Individual gets a 50% increase in wage for hours worked beyond 8.
c. Individual gets a 50% increase in wage for hours worked beyond 8.
d. Government prohibits work beyond 10 hours.
e. Due to the end of daylight saving time, clocks are turned back, and she gains one hour.
f. Government guarantees that everyone has $40 per day. For example, the government pays a subsidy to individuals such that their income is $40 if their earnings are less than $40. For those who earn $40 or more, the subsidy is zero.
g. Government guarantees that everyone who works at least 4 hours earns $40. For example, the government pays a subsidy to individuals such that their income is $40 if their earnings are less than $40 as a result of their four hours of work. Those who work less than 4 hours receive zero subsidy. For those who earn $40 or more, the subsidy is zero.