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An individual's decision to supply her labor or to spend her time in leisure activity is known as the labor-leisure tradeoff.
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- What is two factors that may influence the shape of individuals’ indifference curves (flat or steep) which reflect their preferences for work or leisure? What is the difference between income effect and substitution effect under the basic work-leisure decision model?Suppose John has 24 hours in a day. He can spend his time either working at his job where he earns $20 per hour, or he could spend it doing leisure (everything else, including sleeping). a) Using the labor-leisure choice model, draw a graph that shows his optimum labor supply would be 10 hours a day (with $0 non-labor income). Make sure your graph is completely labeled. b) On the same graph, show what would happen if he receives $100 a day in non-labor income. Breifly explain what is happening in words.Suppose John has 24 hours in a day. He can spend his time either working at his job where he earns $20 per hour, or he could spend it doing leisure (everything else, including sleeping). a) Using the labor-leisure choice model, draw a graph that shows his optimum labor supply would be 10 hours a day (with $0 non-labor income). Make sure your graph is completely labeled. b) On the same graph, show what would happen if he receives $100 a day in non-labor income. Breifly explain
- Refer to the labor–leisure budget constraint shown to answer the questions. This curve shows trade-offs between income and leisure that must be made over the course of one day. How much does this person earn per hour? $ At point A, how many hours of labor are selected? hourshours At point A, how many hours of leisure are selected? hoursSuppose that John could work 365 days per year and could earn $200 per day for each day he worked. Draw his budget lines with respect to his labor-leisure choice.An individual values both consumption and leisure. Suppose the individual has 1600 hours per week they can allocate between leisure and work. IF the individual works, they make a wage of $25 per hour. The individual's utility function is given as a function of leisure time, L and consumption, c: U(L, c) = L^(1/2)c ^ (1/2) a) Draw the individual's budget constraint for leisure and consumption. b) How much leisure time will the individual have when utility maximizing? c) Consider a Universal Basic Income policy like the one proposed by Andrew Yang that would give all individuals a lump -sum, unconditional cash transfer of $1,000 each month. How much leisure time will the individual have when utility maximizing with the cash transfer? d) Now suppose, instead of a cash transfer, a minimum wage of $40 per hour is implemented. How much leisure time will the individual have when utility maximizing with the cash transfer? e) What change in leisure time can be attributed to the substitution…
- Determine whether the following statements are true, false, or uncertain. Please illustrate and explain your answer. If leisure is a normal good, then an individual's labor supply curve must be positively sloped. If leisure is an inferior good, then an individual's labor supply curve must be negatively sloped.Winona has 80 hours to divide between leisure and labor. Her utility function is u(r,c) = f(r) + c, when r represents hours of leisure,c represents dollars of consumption, and f is strictly concave. Winona’s wage is w0= $15/hr. initially, then it rises to w1= $20/hr. (i) Explain what happens to Winona’s labor supply when the wage rises,and why. (ii) Explain how the answer to (i) would change if Winona were to win a lottery.Rebecca's wage is $10 per hour, and she can work up to 60 hours per week. The table and the budget constraint graph show the trade-off that she faces between income and leisure in one week of potential work at this wage. Her manager raises her wage to $15 per hour. Change the graph below to illustrate her new income-leisure budget constraint. The line and the individual endpoints are movable. Assume that nothing else changes. Hours Leisure time Income ($) (hours) worked at $10/hour 0 200 400 600 0 20 40 60 60 40 20 0 Income ($) 1000 900 800 700 600 500 400 300 200 100 0 0 10 20 30 40 50 60 70 80 90 Leisure (hours)
- Which of the following would cause our budget line (labor-leisure tradeoff) to shift outward? Declining health, which causes a reduction in available productive time. Declining health, which causes an increase in available productive time. Improving health, which causes a reduction in available productive time. Improving health, which causes an increase in available productive time. OIf the consumer's non-labor income increases while wages remain unchanged, what will happen to the budget line? A) The budget line shifts inward without a change in slope. B) The budget line rotates inward from the intercept on the horizontal axis. C) The budget line rotates outward from the intercept on the vertical axis. D) The budget line shifts outward without a change in slope. An optimum labor-leisure that occurs as a corner solution A) can be an equilibrium in the aggregate economy. B) includes the consumption of only one good. C) cannot exhaust the budget constraint. D) includes the exact same amounts of each good. ) If a firm is a price taker in both the labor market and the output market, it will A) hire labor until the marginal product of labor equals the output price. B) hire labor until the marginal product of labor equals zero. C) earn zero economic profit in the short run. D) hire labor until the marginal product of labor equals the wage rate.Illustrate (using a labor-leisure choice diagram) how a firm may induce a typical employee to lengthen his work week voluntarily by paying him premium wage rates for overtime hours.