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This question focuses on the graphics of the static model of the good's and labour markets

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This question focuses on the graphics of the static model of the good's and labour markets. 2.A (15 points) Consider the static model WITHOUT capital. Assume that for the household, the substitution effect is greater than the income effect for a change in the real wage. Suppose the government introduces a wage subsidy equal to s > 0) which it pays to the firm for each hour of labour it hires. So for the firm, this subsidy will be as though the real wage they pay fell from w tow-s. and for the household, this subsidy will be as though the real wage they receive rose from tto wts. Draw a Labour Supply Diagram and a PPF-Household Diagram to depict and explain the effect of the subsidy on equilibrium labour input and output of the final good. (It is interesting to note that the Canadian government offered a wage subsidy, the Canadian Emergency Wage Subsidy (CEWS), to some firms in response to the Covid-19 pandemic.) 2.B. (15 points) Consider the static model WITH capital. Suppose the economy experiences an exoge- nous increase in the supply of capital and this causes the equilibrium real wage and equilibrium labour hours to increase. Draw a PPF-Household Diagram to depict the effects of the increase in capital on the equilibrium real wage, equilibrium labour hours, equilibrium leisure, equilibrium output, and household utility.