antipoverty program costs more money. Still, it may be preferable in the long run to spend more money on a

program that retains a greater incentive to work, rather than spending less money on a program that nearly

eliminates any gains from working.

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15.2 • The Poverty Trap 365

FIGURE 15.4 Loosening the Poverty Trap: Reducing Government Assistance by 50 Cents for Every $1 Earned On

the original labor-leisure opportunity set, the lower, downward-sloping budget set, the preferred choice P is 500

hours of leisure and $16,000 of income. Then, the government created an antipoverty program that guarantees

$18,000 in income even to those who work zero hours, shown by the hoizontal dashed line. In addition, every $1

earned means phasing out 50 cents of benefits at $18,000. This program leads to the higher budget set, which the

diagram shows. The hope is that this program will provide incentives to work the same or more hours, despite
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