2. Peter is a single dad. In order to work, he has to place his 3-year-old daugh

Question

2. Peter is a single dad. In order to work, he has to place his 3-year-old daughter, Charlotte, in daycare. e costs $10000 per year. If he works, his wage rate is $10 hour and he can work up to 2000 yeartHs non per year. Inme is $150 his wage rate is $10 hour and he can nark hours a year. His non-labour income is $15000. (a) Carefully drawn Peter's budget line. As he only requires daycare if he works, this can be treated as a work expense father than spending on consumption; as a result, his income and consumption should be treated as net of daýcare expenses (and he does not incur this expense if he elects to not work). (b) With the addition of an indifference curve, illustrate the case where Peter elects to be a (c) On the same diagram, draw the budget line for the case where the wage rate is just high enough (d) Suppose that the wage rate is high enough that Peter chooses to work and the provincial stay-at-home dad rather than working. that he is indifferent between continuing to stay at home and joining the work force. government subsequently introduces a daycare subsidy that reduces Peter's day care expenses by $5000. Under what circumstances would this policy increase Peter's hours worked per year? Explain.

Explanation / Answer

Marginal analysis involves a cost-versus-benefits comparison of various business activities. In marginal analysis, the cost of an activity is measured against incremental changes in volume to determine how the overall change in cost will affect the bottom line of a business. Marginal analysis can show the cost of additional production by a business all the way up to the break-even point. This is generally the maximum cost that a business can sustain without losing money.

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