ECO100Y1 Chapter 3: Chapter 3
Document Summary
y = income after taxes and transfer payments. e = labour market earnings = wages times hours worked. Demogrant: a lump-sum transfer allocated to the worker regardless of his or her work effort or how many or few hours that he or she works (ie. old age security) as they work and earn in income, they forgo a comparable amount in welfare and hence their income does not increase. if the welfare payment is sufficiently high, the individual would have a strong incentive to move to the corner solution where he would not work at all. y = g + (1 t)e, where g = basic guarantee, t = implicit tax rate, y = take-home pay, e = labour market earnings, g > te www. notesolution. com. at the point of maximum leisure the basic income guarantee shifts the potential income constraint upward by the amount of the guarantee.
