Question

Does welfare create work disincentives? If so how and why? (Hint: consider what happens to indifference curve and Budget constraint)

Answer 1

The welfare benefits system introduces one of the most notable barries to employment, training and study. Disincentives are created by compound inflexible and random rules for disability and housing benefits.

It is the most common thing we notice is more welfare benefits, less incentive to work. Social-welfare discourage the work.

Welfare effection indifference curve and Budget Constraint:-

In the following diagram, two goods are taken food and other Goods. A Welfare Program like food stamp programme on consumption and welfare is presented. It effects the IC curve and budget line.

Diagram