You are a person who likes to work as little as possible. You like to consume and enjoy things. However, like many people but you prefer to purchase and consume as much as you can while working as little as possible. It's not that you are lazy; you just don't like to work and be told what to do. You do have a job and your wage is $20 an hour. In an average month you work W hours out of the 30*8=240 hours available to you. Now for some reason your wage rises.
a. Sketch out your budget constraint and your initial position between work and leisure
b. Now place yourself on your new budget constraint after the wage increase. Given your attitude about work, are you likely to work more or less after the wages rises.
c. Differentiate between your own income and substitution effects on your decision to work more or less.
d. In the event you chose to work LESS after the wage rise, how would you interpret your income effect?
e. In the event you chose to work Less after the wage rise, show how you would like work less if your wage increase was replaced by a TANF grant.
f. In man cases with the poor, the TANF program is a DISINCENTIVE to work. Why do you think that is the case?