QUESTION 3 Consider an individual who has to decide how many hours to work in a year. Assume that the maximum number of hours of labour in a year are 4,000 (2 full time jobs), and that this worker can earn $10 an hour. a) Draw the budget constraint facing this individual below: b) Draw an initial indifference curve (above) that represents selecting 2,500 hours of work a year. Label earnings at this point on the budget constraint. c) The EITC offers an income subsidy to low income workers with children. For a family with two children, this tax credit is 40% for all earnings up to $10,510. The credit reaches its maximum here, at $4,204. Families that earn between $10,510 and $14,730 receive this credit as a lump sum. Families that earn above $14,730 lose 21.06 cents of the credit for each dollar they earn above $14,730. Assuming that this worker has two children, illustrate the impact of this credit in the space provided above. (1) Draw an indifference curve for this individual that is tangent to his new budget constraint. How does the EITC affect hours of work? Is this the intended effect of the EITC? Why might this effect r occur in the real world? e) How would the effect on hours of labour differ if the individual initially did not work? Why