Determine will jack work for more hours

Reference no: EM13182467

a. Jack consumes two goods: food and leisure. He works for 8 hours per day and earns a wage of $8 dollars per hour. His rich uncles also give him around $20 per day. Illustrate Jack's choice of work and leisure using an indifference curve and a budget constraint.

Kassahun Melesse

b. If the hourly wage rate increases to $10, will Jack work for more hours? Answer the question by employing income and substitution effects and using a diagram.

c. If the government taxes 25% of Jack's wage income will Jack choose to work for more hours or less? Illustrate using a diagram.

Reference no: EM13182467

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