2. Draw a given worker's indifference curve between consumption and leisure with the budget constraint. Now assume that wage increases. Choose your initial indifference curve, the initial equilibrium and the wage increase, such that after the end of the wage increase, the income effect will have been larger than the substitution effect. Explain your work step-by-step.
2. Draw a given worker's indifference curve between consumption and leisure with the budget constraint. Now assume that wage increases. Choose your initial indifference curve, the initial equilibrium and the wage increase, such that after the end of the wage increase, the income effect will have been larger than the substitution effect. Explain your work step-by-step.
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter24: Measuring The Cost Of Living
Section: Chapter Questions
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