Identify the slope and intercept of the budget line

Reference no: EM13199281

assume total possible hours in the week is 7 days times 16 hours per day, for a total of 112 hours.

a. Draw the budget constraint for a worker who has no unearned income, and earns $10 per hour. Identify the slope and intercept of the budget line.

b. Now suppose the worker has $60 per week in nonlabor income. The income is constant and does not depend on how many hours she worked.

c. Building on (b), suppose that the worker can earn overtime for each hour above 40 hours worked per week. Her base pay remains at $10/hour, but she earns one and one-half time for each hour beyond 40 hours. Draw the new budget constraint.

d. Going back to (b) (and with no overtime), suppose that the $60 per week is a guaranteed payment only if total earnings are $200 or less per week. When earnings go over $200, the $60 is lost. Draw the new budget constraint.

Reference no: EM13199281

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