Florence is a highly paid fashion consultant who earns $100 per hour. She has 16 hours per day that she can allocate to work or leisure, and she decides to work for 12 hours. a. Draw Florence's time allocation budget line for a typical day, and illustrate the indifference curve at her optimal choice. One of Florence's clients is featured on the front page of Vague, an influential fashion magazine. As a result, Florence's consulting fee now rises to $500 per hour. Florence decides to work only 10 per day. b. Draw Florence's new time allocation budget line, and illustrate the indifference curve at her optimal choice. c. Both the income effect and the substitution effect influence how a person decides to change their willingness to work in response to a change in wage. Explain what each effect means. Which effect is stronger for Florence? hours

Florence is a highly paid fashion consultant who earns $100 per hour. She has 16 hours per day that she can allocate to work or leisure, and she decides to work for 12 hours. a. Draw Florence's time allocation budget line for a typical day, and illustrate the indifference curve at her optimal choice. One of Florence's clients is featured on the front page of Vague, an influential fashion magazine. As a result, Florence's consulting fee now rises to $500 per hour. Florence decides to work only 10 per day. b. Draw Florence's new time allocation budget line, and illustrate the indifference curve at her optimal choice. c. Both the income effect and the substitution effect influence how a person decides to change their willingness to work in response to a change in wage. Explain what each effect means. Which effect is stronger for Florence? hours

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A consumer earns a wage of 20 dollars per hour and has an unearned income of $100 per day. What would the consumption-leisure budget line look like? In the graph, also draw the effect of a wage cut, (including the income and substitution effects). Assume she works less after the wage change.
Selena has utility U=lnX + 2lnY Calculate the formula for her marginal rate of substitution between X and Y, showing your work.
Juan is currently working in a job that pays $25 an hour and he chooses to work 8 hours per day. Assume that Juan can work a maximum of 16 hours a day, and he has complete flexibility in how many hours a day he works. Illustrate Juan’s budget constraint and his optimal choice of consumption and leisure. What is the slope of his budget constraint? What does this slope represent? (As on any graph you draw, make sure that you label the axes, the intercepts and the optimal choice.) Juan begins receiving a government transfer payment of $100 per day. Add his new budget constraint to your graph in (a) and show his new optimal choice. Does he choose more or less consumption? More or less leisure? Explain why for both goods. The government imposes a tax of 25% on Juan’s earnings from work and increases his government transfer to $150 per day (the government transfer payment is not taxed.) Redraw the budget constraint from part (b) (omit the part (a) budget constraint), and add a new budget…
Ms. Shanila works as a free-lance worker at a software house. Suppose she keeps awake for 100 hours a week. Also suppose that part of this time she can spend on earning money doing this job and using it for her consumption, and the rest of the time she can spend on her leisure not earning money. At first, she earns Rs.500 for every hour she works. Draw a figure showing Shanila’s budget constraint, her indifference curve for consumption and leisure and her optimum. ii If per hour wage paid to her increases to Rs.600 for doing exactly the same work, draw figures to explain why she would increase her working hours or decrease her working hours. iii Mr. Khan is planning for his requirement. Suppose he can consume his salary of Rs. 100,000 while he is in service or save his salary to consume it after retirement. When he saves his salary he will get 10% interest on it. Draw Dr. Khan’s budget constraint, his indifference curve and his optimum. iv If interest rate goes up to 20%, draw figures…
Joseph earns $200 per week and spends his entire income on cheese which cost $5 per pound and crackers which cost $ 2 per box. Draw Josephs budget constraint. If the price of cheese increases to $8 per pound, what will happen to Josephs budget constraint?
At last time you have answered my question ,but I still have some problems want to ask you and there is not yet complete . Can you help me to use the Budget Line and Indifference Curve concepts and graph to explain to me how changes in income and prices of the goods will give rise to changes in the highest satisfaction. Does the budget line will increase too when the goods or services are increasing? The below is you have answered me at last time
what is the reason for decomposing total effect into substitution and income effect?
Explain the difference between marginal utility and total utility
The indifference curve for Jim, who enjoys muffins and croissants, is illustrated below. Jim is currently consuming 8 muffins and 8 croissants. Which of the following trades would he accept? O give up 2 muffins for 7 croissants O give up 8 croissants for 2 muffins O give up 4 muffins for 3 croissants O give up 2 muffins for 1 croissant
Suppose your classmate Hilary loves to eat dessert-so much so that she allocates her entire weekly budget to apple crisp and pie. The price of one bowl of apple crisp is $1.25, and the price of a piece of coconut crème pie is $5.00. At her current level of consumption, Hilary's marginal rate of substitution (MRS) of apple crisp for pie is 4. In other words, Hilary is willing to sacrifice four bowls of apple crisp for one piece of pie per week. Does Hilary's current consumption bundle maximize her utility? That is, does it make her as well off as possible? If not, how should she change it to maximize her utility? O Hilary could increase her utility by buying more apple crisp and less pie per week. Hilary could increase her utility by buying less apple crisp and more pie per week. O Hilary's current bundle maximizes her utility, and she should keep it unchanged.
just subparts a, b and c please
What examples do you have of the substitution and income effects? Why is the downward slope of the demand curve explained by the substitution and income effects?