Figure below illustrates the effects of an increase inn-T for the consumer in a one-period work-leisure model. Which of the following statements correctly explains the entire effects of an increase in n- T? Leisure, I O A. budget line shift out, slope unchanged, increases consumption, increases labor supply implying a combination of income and substitution effects. O B. budget line out shift, slope unchanged, increases consumption, reduces labor supply implying a pure income effect. OC. budget line shift out, slope unchanged, increases consumption, decreases leisure implying a pure substitution effect. O D. budget line shift out in parallel to FJD, slope unchanged, decreases consumption, decreases leisure thus, neither a pure income effect nor a pure substitution effect. Consumption, C
Figure below illustrates the effects of an increase inn-T for the consumer in a one-period work-leisure model. Which of the following statements correctly explains the entire effects of an increase in n- T? Leisure, I O A. budget line shift out, slope unchanged, increases consumption, increases labor supply implying a combination of income and substitution effects. O B. budget line out shift, slope unchanged, increases consumption, reduces labor supply implying a pure income effect. OC. budget line shift out, slope unchanged, increases consumption, decreases leisure implying a pure substitution effect. O D. budget line shift out in parallel to FJD, slope unchanged, decreases consumption, decreases leisure thus, neither a pure income effect nor a pure substitution effect. Consumption, C
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 1PA
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![Figure below illustrates the effects of an increase in t - T for the consumer in a one-period
work-leisure model. Which of the following statements correctly explains the entire effects of an
increase in n- T?
C2
12
Leisure, I
O A. budget line shift out, slope unchanged, increases consumption, increases labor supply
implying a combination of income and substitution effects.
O B. budget line out shift, slope unchanged, increases consumption, reduces labor supply
implying a pure income effect.
O C. budget line shift out, slope unchanged, increases consumption, decreases leisure
implying a pure substitution effect.
O D. budget line shift out in parallel to FJD, slope unchanged, decreases consumption,
decreases leisure thus, neither a pure income effect nor a pure substitution effect.
Consumption, C](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4661a20c-e778-4c27-9762-ac7fd858e1b8%2F6b3d18b3-ba3a-4cb8-bd7b-5a0503e4f81c%2Fx5x4zj6_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Figure below illustrates the effects of an increase in t - T for the consumer in a one-period
work-leisure model. Which of the following statements correctly explains the entire effects of an
increase in n- T?
C2
12
Leisure, I
O A. budget line shift out, slope unchanged, increases consumption, increases labor supply
implying a combination of income and substitution effects.
O B. budget line out shift, slope unchanged, increases consumption, reduces labor supply
implying a pure income effect.
O C. budget line shift out, slope unchanged, increases consumption, decreases leisure
implying a pure substitution effect.
O D. budget line shift out in parallel to FJD, slope unchanged, decreases consumption,
decreases leisure thus, neither a pure income effect nor a pure substitution effect.
Consumption, C
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