1. Consider an income support program (similar to AFDC before 1967) in which a f

Question

1. Consider an income support program (similar to AFDC before 1967) in which a family of four is guaranteed an income of $1500 per month, so that if their income Y is greater than $1500 they get an income of Y and if their income Y is less than $1500, they receive $1500 minus Y to bring their income up to $1500. Suppose only the head of the household works and suppose the wage rate for the head is $15 per hour.

a. If the head of the household is working 80 hours per month. How much more will the head of household get in income if he or she works 10 hours more?

b. If there are costs for working for the head of household (for example, transportation or clothing), is it likely that the head of household would be working 80 hours per month?

c. Would there be many heads of households working 105 hours per month?

Explanation / Answer

a. 0 as guaranteed income is $1500 and thus if he woorks 10 additional hours still Income remains same

as 15*80 + 300 = 15*90 + 150

b. No, it's not likely  that the head of household would be working 80 hours per month as by decreasing number of hours he works he can increase the income by reducing cost incured in working.

c.No , there will only be only few households.

If you don't understand anything , then comment , I will revert back on the same. :)

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