Question
A worker has no non-labor income and is earning $16/hour. He maximizes utility by working 40 hours per week. Begin by drawing a graph that
A worker has no non-labor income and is earning $16/hour. He maximizes utility by working 40 hours per week. Begin by drawing a graph that illustrates this to be the utility-maximizing solution. The same worker loses his job. He is entitled to unemployment compensation that will pay up to 50% of his weekly earnings. The worker has an opportunity to supplement his unemployment compensation by taking a job that pays $8/hour. Using the same graph, show the worker's new budget line and his utility-maximizing decision as whether to work the new job and how many hours to work. Make sure your graph shows the relevant budget lines and indifference curves.
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