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As a hypothetical case, suppose the typical individual has a utility function expressed as U = (C - 50)*(L - 10), where C is consumption
- As a hypothetical case, suppose the typical individual has a utility function expressed as U = (C - 50)*(L - 10), where C is consumption and L is leisure time. The current wage, w, is $5 and she has a weekly return on assets of V = $100. She only has 60 hours per week to divide between work hours, h, and Leisure. A number of countries and communities are considering implementing a "Guaranteed Basic Income" as policy. A "Guaranteed Basic Income" is a government payment of a fixed a amount of money for each person Suppose the country of interest sets the weekly payment at $100.
- Using the Neo-classical labor supply with reference to specific numerical values discuss the consequences of the above "Guaranteed Basic Income". (15 marks)
- Using the basic Supply and Demand for labor approach discuss the consequences of the "Guaranteed Basic Income" policy on the overall labor market. (5 marks)
- Using a feedback approach, from the Neo-classical labor supply to market equilibrium and back to labor supply, discuss the net results of the Guaranteed Basic Income policy given. (5 marks)
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