1. The federal minimum wage was increased on July 24, 2009, to $7.25 from $6.55.

a. If 16 hours per day are available for work and leisure, draw the daily budget constraint for a worker who was earning the minimum wage rate of $6.55 and the new budget constraint after the increase.

b. what if john wants to maximize his utility only when he is paid the new minimum wage for 16 hours of leisure. Sketch his indifference curve.

c. What if Joe do not want to stay at home but rather work all the time. He maximizes his utility whenever he works 16 hours and do not want money for it (No pay). Sketch Joe's indifference curve.

2 A state government wants to provide incentives for single parents to enter the labor market and become employed. It is considering a policy of paying single parents of children under age 18 $20 per day if the parent works at least six hours a day, five days a week.

a. Draw a presumed or anticipated current daily budget constraint for a single parent

b. Draw in the constraint that would be created by the $20 subsidy.

c. Discuss the possible or expected effects on labor force participation and hours of work.

3. Calculate the own-wage elasticity of demand for the following occupations: a, b, and c. ED and W are the original employment and wage. and W are the new employment and wage. State whether the demand is elastic, inelastic, or unitary elastic. a. %ED = 5, %W = -10 b. ED = 50, W = 7 E'D= 40, W = 8 c. ED = 80, W = 8 E'D = 100, W = 6