The backward bending individual labour supply curve indicates that: 1. the income effect dominates the substitution effect in the upward sloping portion of the curve. II. the substitution effect dominates the income effect in the upward sloping portion of the curve. III. the substitution effect dominates the income effect in the downward sloping portion of the curve.

The backward bending individual labour supply curve indicates that: 1. the income effect dominates the substitution effect in the upward sloping portion of the curve. II. the substitution effect dominates the income effect in the upward sloping portion of the curve. III. the substitution effect dominates the income effect in the downward sloping portion of the curve.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.10P

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Resources Submit All Question 21 of 30 <. The graph shows an individual labor supply curve. Use the graph to answer the questions. Between which two points on the graph does the income effect outweigh the substitution effect? Between points В B and C O A and C OD and E OC and E Quantity of labor Between which two points on the graph does the substitution effect outweigh the income effect? 8:2 46°F 12/1 a Wage rate
69. If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, it can be concluded that: A. The substitution effect is greater than the output effectB. The output effect is greater than the substitution effectC. The income effect is greater than the output effectD. Labor cannot be easily substituted for capital
Assume that a person earns $10 per hour and her non-labor income increases from $100 to$200. She also has 110 hours a week to decide either to work or leisure. a. Draw a budget constraint of this person.b. Draw an indifference curve to show the income and substitution effect of change innon-labor income. HINT: you can draw two separate graphs to show the effect ofsubstitution and income effects.
25 of 38 Jill works as a computer specialist for a local manufacturing firm. If Jill receives a raise in her hourly wage and decides she would like to increase her hours of work, we know that: O A. her income effect is greater than her substitution effect. O B. her substitution effect is greater than her income effect. O C. her income and substitution effect reinforce each other. O D. her income and substitution effects are equal. Unsure
Q13
)ncob buys only milk and cookies.a. In yeor 1, Jocob earns $100, milk costs $2 perqua rt, and cooki es cost S4 per dozen. Ora\"•jacob's budget constraint.b. Now suppose that a ll prices increase by10 percent in yeor 2 ond !hot jacob's salaryincreases by 10 percent as well. Draw jacob'sn<:w budget constraint. How would Jacob'soptimnl combination of milk and cookies in year 2compare to his optimal combination in year 17
Then consider an individual with the exact same preferences (same indifference curve map as in the previous question) and skills, but this person happened to have a better connection with a company and is earning a higher wage than the individual in part 'a'. Thus, this person faces budget line BL' below and takes l'hours of leisure (works T - l'hours). C 50 BL l' O Keep leisure the same T Then this individual is offered the same take-it-or-leave-it (TIOLI) cash grant of $g (that must be forgone if this person works at all). What would this individual do (in terms of leisure taken (and labor supplied))? O Take no leisure 151515 O Take more leisure, but not as much at T. ولا O Take all leisure (not work at all) O None of the other options.
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On weekends Andrew likes to download accounting videos from the CICA server. He has symmetric Cobb Douglas preferences, non-labour income of $120 a day and earns a wage of $20 an hour. Accounting videos (X) have a money price of $20 and take him 15 minutesto download and watch. Andrew also purchases Good Y which has amoney price of $40 and a time price of 30 minutes. a. Provide a fully labelled Indifference Curve diagram that applies Becker's model of Time and Money Prices to determine Andrew's optimal consumption as bundle "a". Put Good X on the horizontal axis. b. The CICA increased their price for accounting videos to $60. To make matters worse their server has been running slow. Andrew now spends 2 hours to download and watch an accounting video. Because he is a very good customer the CICA has offered to compensate him. He will be given a few free downloads every day. Show on your diagram from Part a. the minimum number of free videos they would have to offer him as Bundle “b".His…
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The lines on the graph are budget constraints, showing the tradeoff between labor and leisure. Suppose that when the wage changes, an individual chooses to move from point A to another point on the graph. For each of the other points, where would it belong on the backward bending labor supply curve? Backward‑bendingportionVerticalportionUpward‑slopingportion Answer Bank B D F C E