The graph below shows the budget constraint between income and leisure for an individual. The individual has a totalof 4000 hours to divide between working and leisure for the entire year. The maximum an individual could make by workingall 4000 hours is $20,000. For every hour spent in leisure, one less hour is spent working and vice versa.Suppose that, as illustrated in the graph, a government antipoverty program guarantees the individual $10, 000 in incomeper year.As the current government support is too low to help individuals out of poverty, the government has decided to increase thegovernment support to $22, 000 per year. The individual is no longer motivated to work any hours as it is not possible forhim/her to make more income than the guaranteed government support.Move the Government Support line to illustrate this outcome.Provide your answer below:3000025000(0, 20000).2000015000-Government Support ($10000)100005000(4000, Q)200040003000Leisure (Hours)1000Income ($)

Answered: The graph below shows the budget…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The graph below shows the budget constraint between income and leisure for an individual. The individual has a total
of 4000 hours to divide between working and leisure for the entire year. The maximum an individual could make by working
all 4000 hours is $20,000. For every hour spent in leisure, one less hour is spent working and vice versa.
Suppose that, as illustrated in the graph, a government antipoverty program guarantees the individual $10, 000 in income
per year.
As the current government support is too low to help individuals out of poverty, the government has decided to increase the
government support to $22, 000 per year. The individual is no longer motivated to work any hours as it is not possible for
him/her to make more income than the guaranteed government support.
Move the Government Support line to illustrate this outcome.
Provide your answer below:
30000
25000
(0, 20000).
20000
15000-
Government Support ($10000)
10000
5000
(4000, Q)
2000
4000
3000
Leisure (Hours)
1000
Income ($)

Expert Solution

Step 1

A budget constraint is defined as the combination of all the goods and services that a consumer can purchase at the given prices and with his or her given income. This concept is used in consumer theory along with a preference map to examine the parameters of consumer choices. It's on the basis of this that the consumer equilibrium can be determined. In the above case, consumer budget constraint has been determined to show the trade-off between work and leisure that the consumer would undertake at different levels of the budget constraint.

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