A significant number of economists assume that that typical workers initially increase their labor supply when their wage increases but ultimately they decrease their labor supply when their wage gets higher. Show on two different graphs with indifference curves and budget line, showing labor income tradeoff, how a worker that increases its labor supply when wage increases from a worker that decreases his labor supply.Do you think the assumption above is a reasonable assumption? Explain your answer.

A significant number of economists assume that that typical workers initially increase their labor supply when their wage increases but ultimately they decrease their labor supply when their wage gets higher. Show on two different graphs with indifference curves and budget line, showing labor income tradeoff, how a worker that increases its labor supply when wage increases from a worker that decreases his labor supply.Do you think the assumption above is a reasonable assumption? Explain your answer.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter21: The Theory Of Consumer Choice

Section: Chapter Questions

Problem 9PA

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A significant number of economists assume that that typical workers initially increase their labor supply when their wage increases but ultimately they decrease their labor supply when their wage gets higher. Show on two different graphs with indifference Curves and budget line, showing labor income tradeoff, how a worker that increases its labor supply when wage increases from a worker that decreases his labor supply. Do you think the assumption above is a reasonable assumption? Explain your answer.
4.1 Cindy gets utility from consumption (C) and leisure (L), and has a weekly timebudget ofT= 110 hours. Her utility function isU(C, L) = C L. She receives $660 each week from her great-grandmother regardless of how much Cindy works. What is Cindy's reservation wage? 4.2What is Cindy's optimal labor supply (h) and consumption (C) if her wage is 10 dollars per hour? Show your work.4.3
Consider the following labor-leisure choice model. Utility function over consumption (C) and leisure (L) U(C.L) = (1/3L1/3 Total hours: H = 40 Labor hours: NS = H - L Non-labor income: π = 30 Lumpsum tax: T = 10 Hourly wage: w = 4 Suppose the hourly wage changes to w = 3. What is the substitution effect of this change on labor supply? A. +2.65 B. -2.65 C. +3.48 D.-3.48 E. None of the above
Draw the indifference curve for someone decidinghow lo allocate time between work and leisure.Suppose the wage increases. Is it possible that theperson's mnsumption would fall? ls this plausible?Discuss. (Hint, Think about inmme and substitutioneffects.)
Mary has a total of 16 hours available in a day to allocate between market and nonmarket activities, her non-labor income is $60 a day and her hourly market wage is $7.5. a. Present Mary's budget constraint in a diagram. Please label your diagram properly. b. Suppose that Mary decides to spend 8 hours on market work. How much income does Mary have? Illustrate Mary's labor force participation decision using the indifference curve framework. Please label your diagram properly. c. Suppose that the government were to provide a $2-per-hour subsidy for families with an employed mother who purchases childcare. Assume that Mary has a pre-school age child. Explain how this subsidy would affect the number of hours Mary chooses to work using the indifference curve framework. Please label your diagrams properly.
Income $240 $192 0 15 16 17 a) Using the above diagram, decompose the effect of a wage decrease for this individual into Income Effect (IE) and Substitution Effect (SE). Leisure 24 b) How many hours of work is effected because of the IE? c) How many hours of work is effected because of the SE? d) What is the net effect of this wage decrease on hours of work for this individual?
Explain in detail Discuss the possible substitution effect and the income effect of an increase in income on leisure time.
Consider two individuals, Carole and Mo, who each have a job opportunity that pays a wage of $20 per hour and allows them to choose the number of hours per week they'd like to work. Carole has stronger preferences for leisure than Mo. Ultimately, both Carole and Mo choose to work more than zero hours per week. Draw (and upload) one graph that includes: • Carole and Mo's income-leisure constraint • Carole's utility-maximizing indifference curve (Uc) and choice of leisure hours (Lc) • Mo's utility-maximizing indifference curve (UM) and choice of leisure hours (LM) [Note: There are multiple, though similar, ways to draw this graph. Focus on ensuring that the constraint, indifference curves and hours worked align with the information provided above.]
Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with workers' compensation and has decided to cut the wages of its two employees (Albert and Sid) from $21 per hour to $17 per hour. Assume that Albert and Sid view income and leisure as "goods," that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Albert and Sid's opportunity set is presented below: Albert and Sid's Opportunity Set Income 0 5 10 15 20 25 30 Leisure Hours What is the value of A when the wage is $21? (Assume a 24-hour work day.) What is the value of A when the wage is $17? (Assume a 24-hour work day) At the wage of $21 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and equivalently supply 12 hours of labor). After wages were cut to $17, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure.…
Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with workers’ compensation and has decided to cut the wages of its two employees (Albert and Sid) from $23 per hour to $20 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Albert and Sid's opportunity set is presented below: "The horizontal axis labeled leisure hours ranges from 0 to 30 in increments of 5. The vertical axis is labeled income. A line begins at point A on the vertical axis goes down to the right and ends at the point (25, 0)." What is the value of A when the wage is $23? (Assume a 24-hour work day.) What is the value of A when the wage is $20? (Assume a 24-hour work day.) At the wage of $23 per hour, both Albert and Sid are observed to consume 13 hours of…
1.4 10c44 is the utility function of Fredvick 9 Sales executive at Barclays who maximizes uti lity by combining Leisure (L) with a maket basket of consumptive goods (c) 9 If tredrick does not earn any non -labair income(v estimate his labour supply function in temo of I,P and w. Where P= price, T = Total time wage rate. b) Calculate his reservation wage if T= 24 and P= I Calculate his oLon wage elasticity of labour supply equilibrium- in
Hannah’s wage rate is initially $10 per hour and she maximises her utility by supplying 8hours of work. Subsequently, her wage rate increases to $15 per hour and her newequilibrium position corresponds to 9 hours of work. It is noted that the income effect (IE)causes the labour supply to change by 1 hour and the substitution effect (SE) causes thelabour supply to change by 2 hours. How to draw in diagram, to show the IE and SE?