Graphing budget constraints

Reference no: EM1312058

Assume that a state government currently provides no child care subsidies to working single parents, but that it now wants to adopt a plan that will encourage labor force participation among single parents. Suppose that child care costs are hourly, and suppose the government adopts a child-care subsidy that pays $3 per hour for each hour the parent works, up to 8 hours per day.

1. Draw a current budget constraint for an assumed single mother (net of child care costs) who loves leisure.

2. Draw the new constraint. Discuss the likely effects on labor force participation and hours of work.

Reference no: EM1312058

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