Contemporary Labor Economics
11th Edition
ISBN: 9781259290602
Author: Campbell R. McConnell, Stanley L. Brue, David Macpherson
Publisher: McGraw-Hill Education
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Question
Chapter 2, Problem 16QS
(a)
To determine
Reducing the absenteeism by changing the standard wage rate to premium wage rate.
(b)
To determine
Underemployed worker and the wage rate.
(c)
To determine
Selection of the number of hours worked.
(d)
To determine
Indifference curve and the budget constraint.
(e)
To determine
Income effect of the workers.
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Students have asked these similar questions
A significant number of economists assume that that typical workers initially increase their labor supply when their wage
increases but ultimately they decrease their labor supply when their wage gets higher. Show on two different graphs
with indifference curves and budget line, showing labor income tradeoff, how a worker that increases its labor supply
when wage increases from a worker that decreases his labor supply.Do you think the assumption above is a reasonable
assumption? Explain your answer.
A significant number of economists assume
that that typical workers initially increase
their labor supply when their wage increases
but ultimately they decrease their labor
supply when their wage gets higher. Show
on two different graphs with indifference
Curves and budget line, showing labor
income tradeoff, how a worker that increases
its labor supply when wage increases from a
worker that decreases his labor supply. Do
you think the assumption above is a
reasonable assumption? Explain your
answer.
1.
6.
Consider an individual who initially works T-L. hours per week, where (T-L.)>0. They earn an
hourly wage (W) and no non-labour income.
a) Draw a graph that reflects this individual's income-leisure constraint, utility-maximizing
indifference curve (U.) and choice of leisure hours (L).
b) The government then implements a wage subsidy program in which worker wages are
increased by 10%. This wage subsidy program has no limits, so there is no phase-in/out.
This wage subsidy produces both an income effect and a substitution effect on the worker's
choice of leisure hours. Assume that the substitution effect is stronger than the income
effect.
On the same graph as parta, draw this individual's new income-leisure constraint, utility-
maximizing indifference curve (U.) and choice of leisure hours (Ls).
[Note: When incorporating the 10% wage subsidy into the graph in part b, I am not
expecting perfect precision. Just try your best to draw the new income-leisure constraint as
though a 10%…
Chapter 2 Solutions
Contemporary Labor Economics
Knowledge Booster
Similar questions
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