o g $40x60=52400 Wages: C= 2400 40L 5 BC: C= 1900 - 30L o a 5 $30x5045400= 5 $1900 c u 2 e C5=5760 S C'=5670 3 'i C"=$580 - _ S 3 C=5$400 - & C5=5380 e 5 \\.;. o @ . 1= H=60 : H"=19 H*=10 H=0 1=0 L (Hours of leisure per week) US=41 LT%=50 L=60 Consider four types of individuals with the following utility functions, for consumption(C) and leisure (L) per week i Uy = LC% i U; = LC ii Uy = L2C iv Uy, = L*C Consider the introduction of a universal basic income (UBI) where all government benefits are eliminated but every adult receives UBI payment weekly which is tax- free. To fund the UBI system the GST will need to rise considerably raising all prices. In real terms the UBI payment will be $540 a week and real wages $30 an hour. Income tax will be levied on all real wage earnings at 50% (there will be no tax-free threshold). You do not need to model the increase in the GST, instead define all amounts in real terms (as given in the question above), such that C, is real $ of consumption per week and wages and reservation wages are in real $ per week. a. Re-calculate the real reservation wage for each of the four worker types and use it to determine which type(s) of workers want to work under a UBI. b. Verify that the mathematical expression for the budget constraint of consumption C for leisure L for under the UBIl is C = 1440 15L. c. Calculate the optimal choice of leisure and work hours for a type i individual. d. How has the UBI affected the welfare and labour supply decisions of type i individuals. e. Calculate the optimal choice of leisure and work hours for a type ii individual. f. How has the UBI affected the welfare and labour supply decisions of type i individuals. g. Can you see any issues arising with the labour supply under the proposed UBI? If so, are there any likely consequences on wages