# 14.2 The poverty trap  (Page 6/10)

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Jonathon is a single father with one child. He can work as a server for \$6 per hour for up to 1,500 hours per year. He is eligible for welfare, and so if he does not earn any income, he will receive a total of \$10,000 per year. He can work and still receive government benefits, but for every \$1 of income, his welfare stipend is \$1 less. Create a table similar to that shows Jonathan’s options. Use four columns, the first showing number of hours to work, the second showing his earnings from work, the third showing the government benefits he will receive, and the fourth column showing his total income (earnings + government support). Sketch a labor-leisure diagram of Jonathan’s opportunity set with and without government support.

Jonathon’s options for working and total income are shown in the following table. His labor-leisure diagram is shown in the figure following the table. Number of Work Hours Earnings from Work Government Benefits Total Income 1,500 \$9,000 \$1,000 \$10,000 1,200 \$7,200 \$2,800 \$10,000 900 \$5,400 \$4,600 \$10,000 600 \$3,600 \$6,400 \$10,000 300 \$1,800 \$8,200 \$10,000 0 \$0 \$10,000 \$10,000

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