LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Question
Chapter 5, Problem 5P
To determine
Determine the reason behind the drop in wage differential.
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Students have asked these similar questions
Below are three examples of an individual experiencing a wage change at various points in
their career:
i) After five years of working with their current employer, the individual received a
scheduled increase in their hourly wage.
ii) In celebration of the firm's 50th anniversary, the individual's employer increased the
hourly wage of all employees for the month of February.
iii) After a particularly profitable year, the individual's employer increased the hourly
wage of all employees.
Assume that each wage change generated the same sized substitution effect. Which of the
three wage changes do we expect will least motivate the individual to increase their hours
worked? Explain.
Supply: Thinking Like a Seller - End of Chapter Problem
Jerome is working as an IT consultant. His individual labor supply curve is given in the accompanying graph. Jerome decides to
enroll in college and will begin taking classes next semester.
Make the appropriate change to the graph to show the most likely effect on Jerome's labor supply curve of his decision to attend
college. If Jerome's decision to attend college results in a change in supply, shift the supply curve appropriately, but leave the
wage line unchanged. If Jerome's decision to attend college results in a change in quantity supplied, adjust the wage line
appropriately, but leave the supply curve unchanged.
Wage
Jerome's individual labor supply curve
Wage
Quantity
Supply
In a tradeoff between two decision criteria such as ease of commuting and attractiveness of job, can you use money as a common denominator to estimate precise tradeoffs? State your reasons. Illustrate using the following tradeoff matrix. What sort of salary differences would it take for commute time to trump job attractiveness?Decision Criteria Monetary Issues Other IssuesCommute Time Medium MediumJob Attractiveness High Medium
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