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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Leslie works from home as an IT consultant and consumes only two goods: work (W), which is measured in hours, and consumption (C), which is measured in dollars. Normally she works 40 hours a week and is paid $25 per hour. However, she can be contracted for an additional 30 hours a week at $44 per hour. Leslie cannot work for more than 70 hours a week. For all following questions, round answers to 3 decimal places where necessary. e) What is the minimum number of hours Leslie must work to attain $2056 of consumption a week? Suppose, in parts ( ƒ ) to (h), that the government subsidises workers' wages at $2 for every hour worked. f) At what level of consumption does the kink in this new budget line occur? g) What is the maximum consumption available to Leslie if she works 70 hours a week given this subsidy? h) How many hours fewer does Leslie need to work to attain the maximum level of consumption she could achieve before the subsidy?
Roger's World of Pets is considering adding cat grooming to the array of goods and services he currently provides. He estimates that consumers would be willing to pay $25 per cat for a 1 hr. cat grooming appointment. He also estimates that he would need 2 workers per cat (1 to hold the cat down and the other to groom the cat). Wages in this labor market are $15/hr. Using marginal analysis, Roger should: introduce cat grooming. do not offer cat grooming be on the fence ("indifferent") about introducing cat grooming. be unable to tell whether cat grooming is a good idea because we don't know how much he pays in rent for his shop.
Refer to the following diagram. Point A is 24 hours, C is 14 hours, D is 8 hours, and E is 6 hours. Income B₂ 0 D -Leisure If the current wage rate results in a budget constraint of AB2, how many hours will the individual work?
23. A worker has utility over consumption c and leisure I given by U(c,1) = a 6-6 + 18 where 0 << 1 She has T hours to allocate between leisure and work. For each hour she works, she earns a wage of w to spend on consumption c. The price of c is 1. She also receives an additional 'non-labor income' m regardless of how much she works. She maximizes utility subject to the following constraints: contact@cloure.m Assume interior solution, then cw(T-1) +m C≥O 0≤1≤T A. c is normal and I is inferior good. B. c is inferior and I is inferior good. C. c is inferior and I is normal good. D. c is normal and I is normal good. Page 8
The utility of Amanda for leisure (L) and income (Y) is U = LY. The price of income is 1. If Amanda uses her spare L hours a day, (24 - L) hours will be labored. Since wages are w, the daily income is (24 - L). If the wages are positive, show that the optimal number of leisure hours that Amanda will use will always be the same. How much leisure time does Amanda demand and how much work time do she want to provide?
Using the utility function and wage constraint in the problem, please complete the utility maximization problem using the substituion and Lagrangian method. If you can not do both, I would prefer the substitution method.
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Using indifference curve analysis, show the effects of an increase in the hourly wage rate on labor supply (hours of work) and earnings. Identify the income and substitution effects.
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