Two labor-leisure choice diagrams are shown below. In both cases, the labor-leisure choice diagrams show how the individual's desired amount of leisure is influenced by the increas in her or his wage rate from w, to w2. a. INCOME 24W2 C. 24W₁ b. Leisure is normal. HOURS OF LEISURE Figure A Figure A Figure B For each of the following statements, please indicate if the statement is TRUE (between wage rates w, and w₂) for Figure A, Figure B, both figures, or neither figure. Please circle your response. The substitution effect is zero. Figure A Figure B Figure B INCOME Leisure is neither normal nor inferior. Figure A Figure B 24W2 24w1 Both figures Both figures HOURS OF LEISURE Both figures Neither figure Neither figure Neither figure

Two labor-leisure choice diagrams are shown below. In both cases, the labor-leisure choice diagrams show how the individual's desired amount of leisure is influenced by the increas in her or his wage rate from w, to w2. a. INCOME 24W2 C. 24W₁ b. Leisure is normal. HOURS OF LEISURE Figure A Figure A Figure B For each of the following statements, please indicate if the statement is TRUE (between wage rates w, and w₂) for Figure A, Figure B, both figures, or neither figure. Please circle your response. The substitution effect is zero. Figure A Figure B Figure B INCOME Leisure is neither normal nor inferior. Figure A Figure B 24W2 24w1 Both figures Both figures HOURS OF LEISURE Both figures Neither figure Neither figure Neither figure

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider Justin who makes $1,400 per week and just won a ‘set for life’ lottery ticket whichinvolves a fortnightly payment of $10,000 for 20 years. Currently he works 35 hours per week. Nowdo the following: • Illustrate the effect of the lottery win on Justins budget constraint using a fully labelleddiagram where i) the horizontal axis represents the hours of free time per week, and ii) thevertical axis represents Justins weekly consumption. • Illustrate on the same diagram Justins optimal decisions before and after the lottery winalong with his indifference curves. • Based on your diagram, discuss whether Justin will quit his job.
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2nd attempt See Hint A consumer faces a tradeoff between labor (L) and leisure (R). She consumes a composite good (C). When the consumer works, she earns an hourly wage of $15.00, and she spends a maximum of 24 hours on labor and leisure, but she chooses to work 10.00 hours. Whatever time she does not spend working, she spends on leisure. She starts with an initial endowment of 11.00 units of the composite good, which she can buy and sell freely at a market price of $4.00. Given this information, what is the consumer's real wage? $ 194
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Relate the concept of marginal rate of substitution back to the idea of willingness to pay and economic return. In particular... If my MRS2 for1|> ERS2 for 1| can I receive additional economic return by reallocating by budget away from one commodity and towards another? If so, how? Why? Please include a diagram in your answer.
3.
Consider Laura who makes $1,400 per week and just won a ‘set for life’ lottery ticket which involves a fortnightly payment of $10,000 for 20 years. Currently she works 35 hours per week. Do the following: 1. Illustrate the effect of the lottery win on lauras budget constraint using a fully labelled diagram where i) the horizontal axis represents the hours of free time per week, and ii) the vertical axis represents lauras weekly consumption. 2. Illustrate on the same diagram lauras optimal decisions before and after the lottery win along with his indifference curves. 3. Based on your diagram, discuss whether Laura will quit her job.