When wages increase, the worker will supply more labor only when-
- the substitution effect is larger than the income effect
option(C)
If wages increase, will a worker supply more labor? O A. Only if the income effect...
If wages increase, will a worker supply more labor? O A. Only if the effect of the increase in purchasing power is larger than that of the opportunity cost of leisure increasing. OB. Yes because the opportunity cost of leisure is higher. O C. Only if the effect of the opportunity cost of leisure increasing is larger than that of the increase in purchasing power. O D. Yes because the substitution and income effects both cause workers to supply a...
The leisure demand curves for Sam and Barb are different because O A. Sam's income effect is larger than Barb's income effect, but Sam's substitution effect is smaller than Barb's substitution effect. OB. Sam has only an income effect, while Barb has only a substitution effect. O C. Sam's income and substitution effects are negative while Barb's income and substitution effects are positive. O D. Sam's substitution effect is larger than his income effect, but Barb's income effect is larger...
Suppose the wage decreases. What effect will this have on a worker's labor supply? The substitution effect of a wage decrease causes the worker to supply a smaller quantity of labor. The income effect of a wage decrease causes the worker to supply a larger quantity of labor If the substitution effect is bigger than the income effect, then the supply curve will slope upward
In the labor/leisure model, as wages rise, competing income and substitution effects ultimately determine whether workers supply more or less hours in the labor market. Graph a typical case where workers supply more hours as wages rise. Identify the income and substitution effects. Also explain and show how information from this graph can be used to obtain an individual’s supply curve of labor.
Suppose leisure is an inferior good for a worker. Set up this worker’s indifference curves formoney income and leisure and derive the income and substitution effects of a tax-induced wage decline. Derive the compensated labor supply curve for this worker and explain how it differs from the compensated supply curve of a worker for whom leisure is a normal good.
When leisure is a normal good, the income effect from a decrease in wages is evident in a. a desire to consume more leisure. b. a desire to consume less leisure. c. an upward-sloping labor-supply curve. d. a shift in labor demand.
If the wage elasticity of labor supply is negative, what can we say about the slope of the labor supply curve and the relative sizes of the income and substitution effects? Is leisure a normal or inferior good in this case? Will a fall in the tax rate on earnings increase or decrease tax revenues?
Suppose an economic boom causes incomes to increase and, at the same time, drives up wages for the sales representatives who work for cell phone companies. Assume that smartphones are a normal good. This will cause the: price of cell phones and the equilibrium quantity to rise O price of cell phones to rise, but the change in the equilibrium quantity is unclear and depends on whether the shift in demand is larger or smaller than the shift in supply....
1. The reservation wage likely increases when A. the price of consumption increases. B. the wage increases. C. the price level (of consumption and wages) increases. D. non-labor income increases. E. one is a discouraged worker. 2. Due to the added worker effect, the labor force participation rate A. increases during a recession. B. decreases during a recession. C. a fairly useless statistic. D. over-counts the number of workers wanting a job. E. over-counts the number of workers with a...
1. Consider how a decrease in wage will change a workers labor supply. Explain how income and substitution effect will change this workers choice of consumption and leisure. Make two clearly labeled diagrams showing how reducing a worker's wage affects the hours s/he is willing to work: one in which the income effect dominates, and the other in which the substitution effect dominates.