A person can work up to 100 hours per week at 10 dollars per hour.
(a) Graph her budget constraint (consumption and leisure on the axis).
(b) Suppose that we want to improve her economic conditions with an income guarantee of 300 dollars and a benefit reduction rate of 30 percent (for each dollar that she earns, the program reduces 30 cents on her benefit). Graph her new budget constraint.
(c) Now suppose that the income guarantee rises to 400 but with a reduction rate of 75 percent. Graph her new budget constraint.
(d) Which of these two programs is more likely to discourage work. Explain.