Homework Answers
Option (a) True
There are two effects working when an individual supplies labour in the market. One is the income effect and the other is the substitution effect.
When there is an increase in the real wage, there is an incentive to work more instead of taking leisure and hence supply more labor. This is known as the substitution effect as people substitute leisure for labor.
But, if we assume that leisure is a normal good, then, with an increase in income, the demand for leisure would also increase.So, when there is a strong income effect, workers would substitute less labor and spend more time for leisure.
Thus, if the substitution effect is stronger than the income effect, workers would work more as the real income rises. Working more with increase in real income is explained by the upward sloping demand curve of labor and hence this statement is true.
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represents a possible optimum at a wage of $12 per hour. Given this
optimum at a wage of $12 per hour, an optimum of point
generates a backward-sloping labor-supply curve when
the wage is between $12 and $16 per hour.
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1. What is the primary spatial or urban factor underlying an upward sloping labor supply curve in an open urban model? Draw a picture showing a labor market equilibrium. Assume that growth controls are put in place at the current equilibrium where those controls prevent the construction of new housing, but the current level of housing is sufficient to support the current population of the region. Explain and show the effect of these controls on the labor market picture. Hint:...
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The Keynesian zone of the aggregate supply curve is_._while the neoclassical portion is_.... O upward-sloping, downward-sloping horizontal; vertical O vertical; flat How does the intermediate zone of the AD-AS curve follow Say's law when AD shifts to the right? O SRAS creates more demand by decreasing prices and output level. SRAS moves closer to potential GDP and increases price level. O SRAS is flatter and creates more supply by decreasing prices and output level Which of the following statements about...
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