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11) An increase in the wage rate means that the
12) There is a negative relationship between the price of labor and the quantity of labor supplied, ceteris paribus.
13) We can easily predict whether an increase in the wage will cause a worker to demand more leisure time or less leisure .
14) As the dollar prizes for professional golf tournaments have increased, professional golfers have entered fewer tournaments per year. Is this type of behavior consistent with utility maximization? Explain.
15) Explain the income effect and the substitution effect due to an increase in the wage rate.
16) Tyler's wage rises and he chooses to increase the number of hours he supplies to the labor market. What does this imply about the relative sizes of the substitution effect and the income effect? Explain.
17) Comment on the following statement: "An increase in the wage always leads to an increase in the quantity of labor supplied."
18) Suppose that you currently work 20 hours a week at $10 per hour and your employer tells you he must reduce your wage to $8 per hour. Using the concept of income and substitution effects, explain how you might react.
19) How does occupational licensing affect the labor market for a particular occupation?
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- Rebecca's wage is $10 per hour, and she can work up to 60 hours per week. The table and the budget constraint graph show the trade-off that she faces between income and leisure in one week of potential work at this wage. Her manager raises her wage to $15 per hour. Change the graph below to illustrate her new income-leisure budget constraint. The line and the individual endpoints are movable. Assume that nothing else changes. Hours Leisure time Income ($) (hours) worked at $10/hour 0 200 400 600 0 20 40 60 60 40 20 0 Income ($) 1000 900 800 700 600 500 400 300 200 100 0 0 10 20 30 40 50 60 70 80 90 Leisure (hours)arrow_forwardWhich of the following will cause a movement when looking at an individual’s demand curve? Price The Availability of Alternative Goods Tastes and Preferences Changes in incomearrow_forwardConsider 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.]arrow_forward
- Problem 2 Joan has the following utility function: u(x, y) = 5x + 3y. (a) Find Jane's marshallian demands. (b) Find Jane's hicksian demands. Consider that income is I = $8, and prices are given as p = $4, Py = $2. (c) Does Jane have enough money to attain a utility level of 20? Justify your answer. (d) Assume thè price of y marginally increases. Find the total, income and substitution effect for r due to the change in py.arrow_forwardAssuming we have a choice where we work and how many hours we want to work, what determines the number of hours we will work? Marginal changes in our opportunity cost (utility) of leisure as income increases (the substitution effect) Marginal changes in the utility of our income as total income changes (the income effect) It is based on how much money we need to meet our basic needs A combination of A and Barrow_forwardQUESTION 7: Budget constraints Everyone is endowed with 168 hours in a week (24X7). If you work 40 hours or less, you w=$20 per hour. If you work overtime, you earn w-$25. Assume the worker has M= non-labor income and that the price of the consumption good is p. Draw the budget constraint. Label the intercepts and the slopes in both the overtime and non-overtime region.arrow_forward
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