The graph below shows the budget constraint between income and leisure for an individual as well as a government program that guarantees a certain amount in income but then reduces this amount by $0.50 for each $1.00 earned. Step 1. Move the government support line (dotted line) to reflect the data given in the table. Step 2. Move the vertical intercept of the budget line to reflect the data given in the table. Note: On both steps, assume that the table gives information up to the maximum available time for work/leisure for this individual. Table 1: The Labor-Leisure Tradeoff with Assistance Reduced by $0.50 for Each $1.00 Earned Amount Worked (hours) Total Earnings Government Support Total Income $18, 000 $18, 000 500 $4, 000 $16, 000 $20, 000 Provide your answer below: 30000 (0, 25000) 20000 10000- -Government-Support-(900,$12000)- Income ($)

The graph below shows the budget constraint between income and leisure for an individual as well as a government program that guarantees a certain amount in income but then reduces this amount by $0.50 for each $1.00 earned. Step 1. Move the government support line (dotted line) to reflect the data given in the table. Step 2. Move the vertical intercept of the budget line to reflect the data given in the table. Note: On both steps, assume that the table gives information up to the maximum available time for work/leisure for this individual. Table 1: The Labor-Leisure Tradeoff with Assistance Reduced by $0.50 for Each $1.00 Earned Amount Worked (hours) Total Earnings Government Support Total Income $18, 000 $18, 000 500 $4, 000 $16, 000 $20, 000 Provide your answer below: 30000 (0, 25000) 20000 10000- -Government-Support-(900,$12000)- Income ($)

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter12: Medicare

Section: Chapter Questions

Problem 2QAP

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In this hypothetical economy, there are two consumers living over two periods of life. Ann's incomes are $50,000 in both periods. Meanwhile, Bob earns nothing in the first period but $105,000 in the second period. Both of them can borrow or lend at the interest rate r. For simplicity, assume that there are no taxes. a)Assume that both Ann and Bob consume $50,000 in the first period and $50,000 in the second period. Write down the lifetime budget constraint for each consumer then calculate the interest rate r. Describe the economic behaviour of each consumer. b) Suppose the interest rate increases. What will happen to Ann's consumption in the first period? Is Ann better off or worse off than before the interest rate rises? Explain your answer using an appropriate diagram c) What will happen to Bob's consumption in the first period when the interest rate increases? Is Bob better off or worse off than before the interest rate increases? Explain your answer using an appropriate diagram.
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