\"A single mother\'s net earnings are $8 per hour, and her productivity at home
ID: 1247627 • Letter: #
Question
"A single mother's net earnings are $8 per hour, and her productivity at home is also $8/hour. Draw her weekly budget constraint for a 40 hour work week, with market and non-market goods on the Y and X axis respectively. Secondly, suppose she is awarded $200 of alimony each week. Is she more/less likely to work for pay?"I was going to draw the X and Y axis with the value of 320, and a downsloping line going through both of them to indicate the budget she has to work with. I was confused if I should increase the value of the "Non-market goods" line to ___ because she could theoretically produce this amount by not going to work or could work domestically on weekend. For the second part I was going to up the values by 200 on each axis, and draw the same downward sloping line.
Please let me know if I am on the right track. Thanks so much in advance!
Explanation / Answer
"I was going to draw the X and Y axis with the value of 320, and a downsloping line going through both of them to indicate the budget she has to work with." This is correct "I was confused if I should increase the value of the "Non-market goods" line to ___ because she could theoretically produce this amount by not going to work or could work domestically on weekend." I'm not quite sure what this is supposed to mean. Why would you increase anything? You are still on the first part of the question. "For the second part I was going to up the values by 200 on each axis, and draw the same downward sloping line." This is incorrect. Quite literally, non-market goods can not be bought in markets. Hence, no matter how much alimony she gets, she won't be able to buy more non-market goods. Therefore her maximum consumption of non-market goods stays at 320/week. Her maximum consumption of market goods,however, increases by 200. Therefore the graph will be horizontal at y=320, until you reach the point (x,y)=(200,320), from this point on, the graph will have the same slope as in part 1). To make it clearer: the graph consists of a straight line from point (x,y,)=(0,320) to (200,320) and a straight line from (200,320) to (520,0). Note: the 520 is just the sum of her maximum wage and the alimony, 8*40+200
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