When leisure is a normal good, the income effect from an increase in wages is manifest in a(n): Select one: a. desire to consume less leisure b. a change in preferences c. desire to consume more leisure d. a shift inwards of the budget constraint

When leisure is a normal good, the income effect from an increase in wages is manifest in a(n): Select one: a. desire to consume less leisure b. a change in preferences c. desire to consume more leisure d. a shift inwards of the budget constraint

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 12RQ: Why does a change in income cause a parallel shift in the budget constraint?

See similar textbooks

Similar questions

1.In income substitution effects acts in opposite direction, then the total effect on consumption is always negative. (T/F)
4. Steve's utility funetion over leisure and consumption is given by u(L,Y) = min (3L, Y). Wage rate is w and the price of the composite consumption good is p = 1. (a) Suppose w = 5. Find the optimal leisure - consumption combination. What is the amount of hours worked? (b) Suppose the overtime law is passed so that every worker needs to be paid 1.5 times their current wage for hours worked beyond the first 8 hours. Will this law induce Steve to work more hours? If so, how many? If not, explain.
1. Refer to graph (multiple choice) graph represents Cara's budget constraint and preferences A. Refer to Graph, Which of the statements below is the most accurate? a. At point A, Cara's marginal valuation of leisure is higher than the market wage b. At point B, Cara's marginal valuation of leisure is higher than the market wage. c. At point B, Cara values leisure the same amount as at point A. d. At point A, Cara's marginal valuation of leisure is higher than the market wage, and at point B, Cara values leisure the same amount as at point A. B. Refer to Graph, At point A, Cara’s marginal rate of substitution of leisure for income a. exceeds the wage and Cara would like to work fewer hours. b. is less than the wage and Cara would like to work more hours. c. exceeds the wage and Cara would like to work more hours. d. is less than the wage and Cara would like to work fewer hours. C. Refer to Graph, Based on the graph above, we can conclude that a. Cara does not have…
Q5
QUESTION 5 Suppose that a consumer faces a wage increase. Which picture best represents the change in their budget constraint? Consumption leisure Consumption leisure Consumption leisure Consumption leisure
7. An individual's utility function is given by U =1000x, +450x, +5 x,x, -2x - x where x, is the amount of leisure measured in hours per week and x, is income earned measured in cedis per week. Determine the value of the marginal utilities, when x, = 138 and x, = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?
4. Based on the intuition underlying the substitution effect, an individual would do the following: (A). Reducing working hours when her wages increase, because she wants to replace leisure with work.(B). Reducing working hours when her wages increase, because she wants to replace work with leisure.(C). Increase working hours when wages increase, because leisure becomes relatively more expensive than consumption.(D). Increase working hours when wages increase, as leisure becomes relatively cheaper than consumption.(E). Increase consumption and leisure. Choose one of the answers from the five choices provided. And please, also provide a brief description, explanation or argument for your choice. Thank you Bartleby!
5. Rhoda’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) × (L - 40). There are 110 (non-sleeping) hours in the week available to split between work and leisure. Rhoda earns 10 GHS per hour after taxes. She also receives 320 GHS worth of support from her parents each week regardless of how much she works.a. What will be Rhoda’s marginal utility of leisure and her marginal utility of consumption?b. What is Rhoda’s marginal rate of substitution when L = 100 and she is on her budget line?c. Find Rhoda’s optimal amount of consumption
5. Rhoda’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) × (L - 40). There are 110 (non-sleeping) hours in the week available to split between work and leisure. Rhoda earns 10 GHS per hour after taxes. She also receives 320 GHS worth of support from her parents each week regardless of how much she works.a. What will be Rhoda’s marginal utility of leisure and her marginal utility of consumption?b. What is Rhoda’s marginal rate of substitution when L = 100 and she is on her budget line? c. Find Rhoda’s optimal amount of consumption.
11. A worker derives utility from consumption, C and leisure, L U = U(C, L) and initially faces the constraints p.C = N+w.H H = 24 - L where p is the nominal price of consumption, N> 0 is unearned income, w is the nominal wage and H is hours worked. (a) Derive the budget constraint in terms of C and L and show on a diagram an initial optimal choice of C and L, in which both are positive. (b) State this equilibrium algebraically, and briefly explain how it can be derived. (c) Show that, assuming normality of leisure, for some value N*, if N> N*, the individual will choose not to work. Is the initial level of N in your answers to parts a) and b) greater or less than N*?
I Consider a consumer who has the following utility function of consumption ( C 1. -- ) and leisure ( L ), U = CL?. The wage rate is $20 per hour, the price of consumption is $10 per unit, and the consumer's non-labor income is $60. The time endowment of the consumer is 24 hours. (1).( ) What's the utility-maximizing choice of consumption and leisure? (2).( Show that at that choice, the marginal rate of substitution between consumption and leisure is equal to the real wage.
4. A consumer’s utility function over leisure and consumption is given by u(L, Y) =LY. Wage rate is w and the price of the composite consumption good is p = 1. (a) Suppose w = 10. Find the optimal leisure - consumption combination. (b) Suppose the overtime wage law is passed so that the firm must pay 1.5 times the normal wage for hours worked beyond the first 8 hours. Find the effect on the hours worked. Decompose the effect into substitution effect and income effect