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Use a diagram to thoroughly explain the backward bending labor supply curve and explain what income and substitution effects are.
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- With the help of a diagram, make a distinction between substitution effect and income effect on individual labour supply.Q. 1 Analyze and graph the Product Effect and the Substitution Effect in labor demand in the face of an increase in labor price.Why might a labor supply curve be backward bending? Explain your answer using the concepts of the income effect and the substitution effect. (You can explain your answer using words or you can draw a graph accompanied with a brief explanation)
- What is marginal rate of technical substitution?How does the addition error occur when obtaining the market labor demand curve? What to do to avoid this? Explain with the help of the figure.Sam has the following labor supply curve: The income effect of a higher wage outweighs the substitution effect when wages are _____ . The income effect is the phenomenon that workers choose to work _____ hours when they are given a raise, because _____ .
- The lines on the graph are budget constraints, showing the tradeoff between labor and leisure. Suppose that when the wage changes, an individual chooses to move from point A to another point on the graph. For each of the other points, where would it belong on the backward bending labor supply curve? Backward‑bendingportionVerticalportionUpward‑slopingportion Answer Bank B D F C EYou are given a scenario where this a change in a factor of production or a change in demand for an item. Explain in sentence form how this would change the demand for labor. See the example and model your answers after how the example is written. Change in Factor of Production Effect on Labor Market Example: There is a decrease in the price of oil, and you make plastic containers. The decrease in the price of oil will make it cheaper to produce plastic containers. The firm can lower its price and it will sell more. This will increase the demand for labor at your firm. 1. Apple develops the iPhone and demand for it surges as people realize the benefits of this improved technology. You manufacture flip phones. 2. You own a sports equipment manufacturing firm. You were just informed rent at your warehouse space would double. 3. You develop a popular video game and continue to develop new versions to keep people interested in the game.…If the substitution effect of a wage change outweighs the income effect of a wage change, the labor-supply curve is A) horizontal. B) upward sloping. C) vertical. D) backward bending.
- Illustrate graphically and explain the income and substitution effects of a wage decrease on hours of labor supply for the case in which the individual's labor supply curve is backward bending. Graphically derive the individual's labor supply curve.Resources Submit All Question 21 of 30 <. The graph shows an individual labor supply curve. Use the graph to answer the questions. Between which two points on the graph does the income effect outweigh the substitution effect? Between points В B and C O A and C OD and E OC and E Quantity of labor Between which two points on the graph does the substitution effect outweigh the income effect? 8:2 46°F 12/1 a Wage rateConsider the market for labor depicted by the demand and supply curves that follow. Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. Graph Input Tool Market for Labor 24 I Wage (Dollars per hour) 21 Supply 3.00 Labor Supplied (Thousands of workers) 18 Labor Demanded (Thousands of workers) 1,050 150 15 12 Demand 3 150 300 450 600 750 900 1050 1200 LABOR (Thousands of workers) Complete the following table with the quantity of labor supplied and demanded if the wage is set at $15.00. Then indicate whether this wage will result in a shortage or a surplus. Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers. Labor Demanded Labor Supplied Wage (Thousands of workers) (Thousands of workers) Shortage or Surplus? $15.00 Suppose a senator considers introducing a bill to legislate a minimum hourly wage of $15.00. Which of the following statements…
