John earns 4 per hour. He has no nonlabour income. He decides to work 20 hours per week.

(a)Show John's utility maximizing choice of leisure and his weekly income on a diagram.

(b)Now the government introduces a welfare system that provides a minimum lump sum income of 80 per week. Draw John's new budget line. Assuming that leisure is a normal good, will John work fewer hours under the welfare system? Explain.

(c)Instead of the lumpsum payment in (b), the government offers John an extra 50p per hour worked. Draw the new budget constraint. Assuming again that leisure is a

normal good, will John work more or less than 20 hours per week? Explain.