Once an individual reaches age 66, he or she qualifies for full benefits under the Social Security program. Assume the size of these potential benefits is $1,000 dollars per month. These are the benefits actually received as long as the individual's earnings are less that $500 dollars per month. Under the original design of the program, Social Security benefits were reduced by a dollar for each extra dollar earned above $500 dollars per month, until all benefits had been withheld. (To keep the discussion simply, ignore any income taxes or payroll taxes.)
Graph the individual's budget constraint taking account of both Social Security benefits and the possible withholding of these benefits based on the individual's earnings. Which levels of earnings would you NOT expect to see, in light of the Social Security program?