Q2) Samantha has an annual non-labour income of $5000. Suppose she has the to available time of 4160 hours per year. Samantha's wage rate is $15 per hour, and s chooses to work 2000 hours in a year. Suppose when Samantha's wage rate increas from $15 to $18 per hour, she will work 2040 hours. At $18 per hour, if she works 22 hours per year, she would be indifferent to her original work decision before the wag increase. a) Draw a diagram to show all the given information related to Samantha's w circumstances. Calculate all the relevant income levels and label them in the gra b) Calculate Samantha's income effect, substitution effect and total effect related to wage increase. Show them in the diagram.

Q2) Samantha has an annual non-labour income of $5000. Suppose she has the to available time of 4160 hours per year. Samantha's wage rate is $15 per hour, and s chooses to work 2000 hours in a year. Suppose when Samantha's wage rate increas from $15 to $18 per hour, she will work 2040 hours. At $18 per hour, if she works 22 hours per year, she would be indifferent to her original work decision before the wag increase. a) Draw a diagram to show all the given information related to Samantha's w circumstances. Calculate all the relevant income levels and label them in the gra b) Calculate Samantha's income effect, substitution effect and total effect related to wage increase. Show them in the diagram.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.3P

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