DUE FRIDAY: HELP WITH PART C & D THANK-YOU!

Consider workers at a local caf that opens 7 days a week, the caf allows its workers to choose how many days per week they work and which days of the week they work. The caf pays its workers $100 per day, but on Saturdays it must pay workers a 25% loading and pay a 35% loading on Sundays (the current penalty rates for such workers in Australia), such that they earn $125 on Saturdays and $135 on Sundays.

Assume that workers do not care which days of the week they work other than the fact the get paid more on Saturdays and Sundays. Such that the first day they work (if they choose to do so) is always Sunday and if they choose to work a second day it is always Saturday, if they which to work a third to seventh day a week it is week-day (Monday to Friday). In addition, assume workers have no other income or employment opportunities.

QUESTIONS:

a.

Draw and label a diagram showing the budget constraint of caf workers for consumption and leisure. Be sure to indicate the slope for each segment of the budget constraint. You do not need to calculate the kink points in the budget constraint.

b.

The caf manager complains that he has too many staff for the weekends, but not enough for the weekdays. Explain using your diagram in a. why this is likely to be true.

c.

You advise the caf manager to only allow workers to take Saturday and Sunday shifts after they have already worked 3 week-days. Draw a diagram with the budget constraint for the new choice workers face between consumption and leisure under this scheme and also the original scheme.

d.

Explain the effect of the new scheme on caf workers' choice of work hours and their welfare.Consider different type of workers based on their choice of work-days under the existing scheme. Explain how the new scheme will address the caf managers problem.