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Income-Leisure Choice Theory: The Basic Model:

Imagine a Congressman is proposing to improve the welfare of every citizen in the U.S. by paying a base income of $1,200 a month to everyone regardless of income,a ssets, age, etc. The argument of the congressman is that by doing so people could work in jobs "they really like" instead of working just to earn an income. What do you think of such a proposal? Specifically, evaluate this proposal in light of the income-leisure model and make comments about what that model predicts about labor supply if such proposals would become law. Support your answer with a graph.

Solution Summary

Income-Leisure Choice Theory is summarized.