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2. [25 points] Suppose an EI program is introduced in which the replacement rate is 50%, the minimum number of weeks needed to qualify
2. [25 points] Suppose an EI program is introduced in which the replacement rate is 50%, the minimum number of weeks needed to qualify for the program is 20 weeks, and the maximum benefit duration is 10 weeks. Suppose the weekly market wage is $400. No waiting period is required and non-labour income, X, is equal to 0. a) [10 points] Assuming a non-leap year of 52 weeks, draw the individual's budget constraint before and after the introduction of this EI program. Clearly label all slopes of the budget constraints and relevant weeks on the leisure axis. b) [10 points] How might the following individuals react to the implementation of the EI program? Demonstrate and explain your answers with reference to the graph in part (a). Make reference to any income and substitution effects. (i) Person A worked 30 weeks prior to the EI program. (ii) Person B worked 50 weeks prior to the EI program. 3 was downloaded by 100000841803331 from CourseHero.com on 10-27-2023 00:29:34 GMT -05:00 sehero.com/file/27619419/MT-Exam-1pdf/ c) [5 points] Suppose the minimum number of weeks needed to qualify is reduced to only 10 weeks. In a new graph, show and explain how the budget constraint would change. How will this policy change impact the size of the El triangle and the decision to work on behalf of El recipients?
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