1. Assume you can work as many hours you wish at 20 per hour (net of tax). If you do not work you have no income. You have no ability to borrow or lend or save, so your consumption, c, is simply equal to your income.
2. (a)Assume that under these circumstances your optimal choice of consumption and leisure is to work 8 hours per day. Illustrate this choice diagrammatically using the feasible set and indifference curves, defined in terms of daily values of consumption c, and "leisure", l = 24 minus hours worked. (25 marks).
3. (b)Now assume that the government introduces a Universal Basic Income (UBI) of 140 per week, which you receive irrespective of how much you work. Show the impact on your feasible set, for a given wage, and show that, assuming both c and l are "normal goods", labour supply will decrease.
4. (c)Now assume that the government abolishes the UBI, but intro- duces income tax reductions that mean that your hourly wage rises to 30 per hour after tax. Show that in general the impact of such a change on your labour supply is ambiguous, and ex- plain how the ambiguity of your answer relates to your answer to part (b).
5. (d)What light does this modelling framework shed on the incentive impact of different government welfare and tax policies?