When focusing on a married couple, one person’s non-labor income includes the labor earnings of his/her partner. Using a graph of budget constraints and indifference curves, describe what would happen to the labor supply of one spouse if the other experiences an involuntary job loss. Your answer does not depend on whether the spouse you’re graphing is initially supplying labor or not.
When focusing on a married couple, one person’s non-labor income includes the labor
earnings of his/her partner. Using a graph of budget constraints and indifference
describe what would happen to the labor supply of one spouse if the other experiences an
involuntary job loss. Your answer does not depend on whether the spouse you’re
graphing is initially supplying labor or not.
Work-leisure choice model:
Individuals need to trade-off between how many hours to work and enjoy leisure. Both commodities are preferred. If he works more, he earns more and can consume more. However, he has less leisure. Now, if he enjoys leisure, his consumption level might fall.
The utility function that depicts this trade-off in a functional form is called the work-leisure choice utility function. And the budget line that determines how much work-leisure bundle he can afford, is the budget constraint. The entire system is called the work-leisure choice model.
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