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
a) A smaller
b) a larger
c) Upward
Suppose the wage decreases. What effect will this have on a worker's labor supply? The substitution...
If wages increase, will a worker supply more labor? O A. Only if the income effect is larger than the substitution effect. OB. Yes because the substitution effect causes workers to supply a larger quantity of labor. O C. Only if the substitution effect is larger than the income effect. O D. Yes because the substitution and income effects both cause workers to supply a larger quantity of labor. O E. No because purchasing power has increased and leisure is...
32. Suppose that in a labor market, the substitution effect is less important in magnitude than the income effect. As a result, A. the labor demand curve is upward sloping. B. the labor demand curve is downward sloping. C. the labor supply curve is upward sloping. D. the labor supply curve is downward sloping. can you explain?thank you
24.)Which of the following must be true if you work less when your wage rate rises? a.)The income effect is small. b.)The substitution effect is large. c.)The income effect is greater than the substitution effect. d.)The substitution effect is greater than the income effect. e.)The income effect is equivalent to the substitution effect. 26.)All else being equal, if the price of labor decreases, a.)the labor supply curve will shift right. b.)the labor supply curve will shift left. c.)the quantity supplied...
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?
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.
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?
2. Suppose a labor market where demand and supply for labor are given by: Ld = 1;000 25w Ls = 100+20w where w is the wage rate. Suppose that the government decides that everyone who works ought to exercise. They are considering two ways to do this, either through a payroll tax on workers of $3 per hour per worker which would then be used to provide workers with free health club memberships or through mandating provision of access to...
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...
Labor Economics, multiple choice questions
1. In the leisure-income model, the wage constraint shows a. the points that maximize a worker's utility b. all points that are equally preferred c. the wage rates that affect work decisions d. the available combinations of leisure and income 2. The slope of a wage constraint reflects the: a. rate at which a person is willing to substitute leisure for income c. income effect b. price of leisure d. substitution effect 3. When a...
The supply curve for labor may shift to the left due to A. an increase in wealth. B. an increase in the wage rate due to the income effect. C. a decrease in the wage rate due to the income effect. D. an increase in the wage rate due to the substitution effect. E. a decrease in the wage rate due to the substitution effect.