3. Suppose that the representative consumer's preferences change, in that his or her marginal rate of substitution of leisure for consumption increases for any quantities of consumption and leisure. a. Explain what this change in preferences means in more intuitive language. Show the effect of this change on the consumer's indifference curve. b. What effects does this have on the equilibrium real wage, hours worked, output, and consumption?
3. Suppose that the representative consumer's preferences change, in that his or her marginal rate of substitution of leisure for consumption increases for any quantities of consumption and leisure. a. Explain what this change in preferences means in more intuitive language. Show the effect of this change on the consumer's indifference curve. b. What effects does this have on the equilibrium real wage, hours worked, output, and consumption?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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
Transcribed Image Text:3. Suppose that the representative consumer's preferences change, in that his or her marginal rate of
substitution of leisure for consumption increases for any quantities of consumption and leisure.
a. Explain what this change in preferences means in more intuitive language. Show the effect of this
change on the consumer's indifference curve.
b. What effects does this have on the equilibrium real wage, hours worked, output, and consumption?
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