(Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure - labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of goods and services at his optimal choice. Use the figures provided to find the y-intercept and his consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new wage. Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to determine whether leisure is a normal or an inferior good for Amit. 1. (Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure-labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of goods and services at his optimal choice. Use the figures provided to find the y-intercept and his consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new wage. Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to determine whether leisure is a normal or an inferior good for Amit.
(Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure - labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of goods and services at his optimal choice. Use the figures provided to find the y-intercept and his consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new wage. Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to determine whether leisure is a normal or an inferior good for Amit. 1. (Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure-labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of goods and services at his optimal choice. Use the figures provided to find the y-intercept and his consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new wage. Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to determine whether leisure is a normal or an inferior good for Amit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:(Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income.
He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per
year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure -
labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly
labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of
goods and services at his optimal choice. Use the figures provided to find the y-intercept and his
consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases
his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would
be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new
wage. Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to
determine whether leisure is a normal or an inferior good for Amit.
1. (Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour
income. He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 =
4160 hours per year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year.
(a) Draw a leisure-labour diagram, clearly indicating Amit's current labour supply decision. (Your
diagram should be clearly labeled and include Amit's budget line and an indifferent curve
showing his leisure and consumption of goods and services at his optimal choice. Use the figures
provided to find the y-intercept and his consumption if he doesn't work.)
(b) Amit's wage rate increases to $25 per hour. In response, he increases his labour supply to 2300
hours. If he were "compensated" accordingly, at this new wage rate he would be just indifferent
to working 2200 hours at his original wage rate and working 2400 hours at the new wage.
Illustrate Amit's new optimal choice. Use the information provided in the previous sentence to
determine whether leisure is a normal or an inferior good for Amit.
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