Question
What is the slope of the budget constraint for Tamara during the first 20 hours of work per week? If she works more than 20
What is the slope of the budget constraint for Tamara during the first 20 hours of work per week? If she works more than 20 hours per week?
Tamara has 80 hours per week that she can allocate to work or leisure. Her job pays a wage rate of $20 per hour, but Tamara is being taxed on her income in the following way. On the first $400 that Tamara makes, she pays no tax. That is, for the first 20 hours she works, her net wagewhat she takes home after taxesis $20 per hour. On all income above $400, Tamara pays a 75% tax. That is, for all hours above the first 20 hours, her net wage rate is only $5 per hour. Tamara decides to work 30 hours. Her indifference curves have the usual shape.
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