Mary has a total of 16 hours available in a day to allocate between market and nonmarket activities, her non-labor income is $60 a day and her hourly market wage is $7.5. a. Present Mary's budget constraint in a diagram. Please label your diagram properly. b. Suppose that Mary decides to spend 8 hours on market work. How much income does Mary have? Illustrate Mary's labor force participation decision using the indifference curve framework. Please label your diagram properly. c. Suppose that the government were to provide a $2-per-hour subsidy for families with an employed mother who purchases childcare. Assume that Mary has a pre-school age child. Explain how this subsidy would affect the number of hours Mary chooses to work using the indifference curve framework. Please label your diagrams properly.

Mary has a total of 16 hours available in a day to allocate between market and nonmarket activities, her non-labor income is $60 a day and her hourly market wage is $7.5. a. Present Mary's budget constraint in a diagram. Please label your diagram properly. b. Suppose that Mary decides to spend 8 hours on market work. How much income does Mary have? Illustrate Mary's labor force participation decision using the indifference curve framework. Please label your diagram properly. c. Suppose that the government were to provide a $2-per-hour subsidy for families with an employed mother who purchases childcare. Assume that Mary has a pre-school age child. Explain how this subsidy would affect the number of hours Mary chooses to work using the indifference curve framework. Please label your diagrams properly.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 9PA

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