A lowincome single mother has the following utility function: = 2/3 ln C + 1/3 ln L

Where is consumption and is leisure. The mother can work up to 160 hrs. per month. Any of the 160 hours that are not worked are consumed as leisure. She has a wage of $6 per hour and the price of consumption is $1. In order to work, she must pay $3 in childcare costs for every hour worked. This means her effective wage is $3 an hour. Note: All graphs must include the slope of the budget line and must numerically label the points where the budget line intersects the vertical and horizontal axis. Assume first that there is no welfare program.

Now assume that the benefit guarantee is reduced to $100.

A. Determine the number of hours worked and consumption, C (You do not need to draw a graph for this portion of the question).

B. Has the change in the welfare program increased or decreased labor supply? consumption?