Consider Greg's decision of how much to work. He initially makes $10 per hour and can potentially devote up to 16 hours a day to work or leisure. His budget constraint is given by y = wh + N.

a. Suppose Greg has no non-labor income. Construct a graph of Greg' budget constraint. Be sure to label the intercepts on the x and y axes.

b. Now suppose his nonlabor income increases from 0 to $40. How does this change your graph? Be specific. Will this change induce a substitution effect, income effect, neither effect, or both effects?

c. He now has $40 of nonlabor income. Suppose the federal government puts a 20 percent tax on his wage earnings. How does this introduction of the tax change your graph? Will this induce a substitution effect, income effect, neither effect, or both effects

d He has $40 of nonlabor income. Suppose is wages increase to $12 per hour but now the federal government decides a 10 percent tax on his wage earnings up to $100 of pretax earnings and 25 percent on everything earned out. How does the introduction of these tax brackets change your graph? Will this induce a substitution effect, income effect, neither effect, or both effects