Jack has 16 hour available to work in the day, his wage rate is $25 per hour, and he has nonlabour income $100 per day. He commutes to office every work day by bus which cost $50 for the round trip and spends 2 hours on commuting the round trip. Part (a): Using a work-leisure diagram, depict the individual’s labour supply choice, including their reservation wage. Part (b): Analyze the impact of an increase in commuting costs from $50 to $70 per round trip on his participation and hours decision. What is commuting time increase from 2 hours to 4 hours keeping the commuting cost same as before.
Jack has 16 hour available to work in the day, his wage rate is $25 per hour, and he has nonlabour income $100 per day. He commutes to office every work day by bus which cost $50 for the round trip and spends 2 hours on commuting the round trip. Part (a): Using a work-leisure diagram, depict the individual’s labour supply choice, including their reservation wage. Part (b): Analyze the impact of an increase in commuting costs from $50 to $70 per round trip on his participation and hours decision. What is commuting time increase from 2 hours to 4 hours keeping the commuting cost same as before.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Jack has 16 hour available to work in the day, his wage rate is $25 per hour, and he
has nonlabour income $100 per day. He commutes to office every work day by bus
which cost $50 for the round trip and spends 2 hours on commuting the round trip.
Part (a): Using a work-leisure diagram, depict the individual’s labour supply choice, including their reservation wage.
Part (b): Analyze the impact of an increase in commuting costs from $50 to $70 per round
trip on his participation and hours decision. What is commuting time increase from 2 hours
to 4 hours keeping the commuting cost same as before.
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