The following diagrams of budget constraints pertain to the next three questions. The vertical axis is Income and the horizontal axis is Leisure.

-Which of the diagrams of budget constraints above depicts the Wage Subsidy program?

Question

The following diagrams of budget constraints pertain to the next three questions. The vertical axis is Income and the horizontal axis is Leisure.
  
-Which of the diagrams of budget constraints above depicts the Wage Subsidy program?

Quizplus · Accepted Answer

A wage subsidy program effectively increases the income of workers for the same amount of labor, shifting the budget constraint outward in a way that increases the slope, indicating that each hour of work now yields more income. This is depicted in option B, where the budget constraint shifts outward in a manner that reflects an increase in the effective wage rate, allowing for more consumption at each level of labor supplied compared to the initial budget constraint.

The Following Diagrams of Budget Constraints Pertain to the Next