Two students, Cindy and Xavier, are discussing labour-leisure choice. Cindy says that if Kimberley has upward-sloping labour supply curve, then leisure must be a normal good for her. If, on the other hand, she is on the backward bonding part of horlabour supply
Two students, Cindy and Xavier, are discussing labour-leisure choice. Cindy says that if Kimberley has upward-sloping labour supply curve, then leisure must be a normal good for her. If, on the other hand, she is on the backward bonding part of horlabour supply
Chapter16: Labor Markets
Section: Chapter Questions
Problem 16.10P
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Question
P2
![Two students, Cindy and Xavier, are discussing
labour-leisure choice. Cindy says that if
Kimberley has upward-sloping labour supply
curve, then leisure must be a normal good for
her. If, on the other hand, she is on the
backward-bending part of her labour supply
curve, then leisure must be an inferior good for
her. Xavier disagrees: "Normal and inferior
goods are about income changes, not wage
changes. Therefore, we do not have enough
information: for Kimberly, leisure could be an
inferior or normal good in either of these cases."
Do you agree or disagree? Carefully explain your
point of view. Support your argument with
graphs of income, substitution and total effects
(please put leisure on the horizontal axis and the
other goods on the vertical axis).
Please assume that Kimberley's preferences over
leisure and other goods are strictly convex and
satisfy "more is better" assumption.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad0d313f-091b-483c-8892-ea3eaf21305e%2Fa9e8432e-381a-418f-8221-a05334214617%2F8b684za_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Two students, Cindy and Xavier, are discussing
labour-leisure choice. Cindy says that if
Kimberley has upward-sloping labour supply
curve, then leisure must be a normal good for
her. If, on the other hand, she is on the
backward-bending part of her labour supply
curve, then leisure must be an inferior good for
her. Xavier disagrees: "Normal and inferior
goods are about income changes, not wage
changes. Therefore, we do not have enough
information: for Kimberly, leisure could be an
inferior or normal good in either of these cases."
Do you agree or disagree? Carefully explain your
point of view. Support your argument with
graphs of income, substitution and total effects
(please put leisure on the horizontal axis and the
other goods on the vertical axis).
Please assume that Kimberley's preferences over
leisure and other goods are strictly convex and
satisfy "more is better" assumption.
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