Suppose that the representative consumer's div- idend income increases, and his or her wage rate falls at the same time. Determine the effects on consumption and labor supply, and explain your results in terms of income and substitution effects.

Discuss the possible substitution effect and the income effect of an increase in income on leisure time.

For this question, assume that indifference curves are strictly convex, consumption andleisure are normal goods, and the optimal amounts of consumption, leisure, and labor arealways positive. A wage increase ______. (SE = substitution effect; IE = income effect)(a) increases labor supply via the SE and decreases labor supply via the IE(b) decreases labor supply via the SE and decreases labor supply via the IE(c) increases labor supply via the SE and increases labor supply via the IE(d) decreases labor supply via the SE and increases labor supply via the IE(e) Can’t tell without knowing the utility function

The substitution effect of an increase in the wage rate will: O always lead to a decrease in the quantity of labor supplied. O always lead to an increase in the quantity of labor supplied. O lead to an increase in the quantity of labor supplied only if leisure is a normal good. O lead to an increase in the quantity of labor supplied only if leisure is not a normal good. O lead to an increase in the quantity of labor supplied only if the income effect works in the same direction.

Consider Justin who makes $1,400 per week and just won a ‘set for life’ lottery ticket whichinvolves a fortnightly payment of $10,000 for 20 years. Currently he works 35 hours per week. Nowdo the following: • Illustrate the effect of the lottery win on Justins budget constraint using a fully labelleddiagram where i) the horizontal axis represents the hours of free time per week, and ii) thevertical axis represents Justins weekly consumption. • Illustrate on the same diagram Justins optimal decisions before and after the lottery winalong with his indifference curves. • Based on your diagram, discuss whether Justin will quit his job.

Refer to the following diagram. Point A is 24 hours, C is 14 hours, D is 8 hours, and E is 6 hours. Income B₂ 0 D -Leisure If the current wage rate results in a budget constraint of AB2, how many hours will the individual work?

Larissa consumes at a point on her budget line where her marginal rate of substitution is less than the slope of her budget line (MRS_X,Y < PX/PY). As Larissa moves toward her optimum consumption bundle, her marginal rate of substitution MRS_X,Y will OA. fall. B. rise. OC. stay the same. OD. It is impossible to tell what Larissa's MRSX,Y will do without further information. Reset Selection

Jack's marginal utility of consumption is MUc = L - 6, and the marginal utility of leisure is MUL=C-40. Jack does not have any nonlabor income, i.e., V = 0. Jack faces a $48 an hour wage rate. Jack's total number of hours available per week is 150. What is Jack's optimal choice of consumption? (calculate to 2 decimal places)

Suppose that the owner of Boyer Construction is feeling the pinch of increased pre￾miums associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 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. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 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 $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours? (LO2, LO3, LO7)

If Molly Bee increases her work hours when her wage increases, then  the income effect of the wage increase outweighs the substitution effect. the substitution effect of the wage increase outweighs the income effect. leisure is an inferior good to Molly. Molly&#39; is spending beyond her means.