(a)Rahul has 168 hours per week to divide between labour and leisure. Rahul can work up to 70 hours a week earning a wage of $30, but faces a payroll tax of 30%. Given these constraints, Rahul chooses to work 40 hours per week. Graph the budget constraint and indicate the optimal choice, make sure to label all important points.

(b)The government proposes a universal basic income whereby everyone is given $390 a week, which is financed by increasing the payroll tax to 62.5%. Add this new budget constraint to your diagram from (a). Be sure to show all your work/calculations, and label all important points.

Is this likely to increase or decrease labour supply for Rahul? Carefull explain.

(c)Is utility higher or lower for Rahul as a result of this change?