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The Democratic People's Republic has two workers in its economy: worker A and worker B. Workers choose a combination of leisure and consumption to maximize

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The Democratic People's Republic has two workers in its economy: worker A and worker B. Workers choose a combination of leisure and consumption to maximize their utility. The individual utility functions are as follows: UA = C7/8 71/8 UB = 1/2 + (30Z) 1/2 where ( stands for consumption, and Z stands for leisure. Any given worker is constrained by a maximum of 24 hours of leisure, or a maximum of 24 hours spent working for an hourly wage, w. One unit of consumption costs $1. The poverty line in this society is at Y = O = 66. A program is proposed whereby a subsidy S = 66 -Y is given to anyone whose income Y is below 66. In order to implement this, money is raised by having a marginal tax rate of 60% for incomes above 100. (Assume any budget surplus or deficit on the part of the government is utility-neutral. Assume that the workers can change their time allocations in response to the announced program. Continue to assume w = 10.) Calculate the utility levels before and after the program is implemented. U A, before U B,before = U A,after = U B,after =

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