a. Jack consumes two goods: food and leisure. He works for 8 hours per day and earns a wage of $8 dollars per hour. His rich uncles also give him around $20 per day. Illustrate Jack's choice of work and leisure using an indifference curve and a budget constraint.
Kassahun Melesse
b. If the hourly wage rate increases to $10, will Jack work for more hours? Answer the question by employing income and substitution effects and using a diagram.
c. If the government taxes 25% of Jack's wage income will Jack choose to work for more hours or less? Illustrate using a diagram.