B: Theory: Labour supply For the following three questions, assume that leisure is a normal good. 3. A worker has a wage of £10 an hour, and chooses to work eight hours a day. Represent this decision in a suitably labelled graph. (Assume convex preferences) 4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down? 5. Return to the scenario in question 3. The worker's wage increases from £10 an hour to £12.

B: Theory: Labour supply For the following three questions, assume that leisure is a normal good. 3. A worker has a wage of £10 an hour, and chooses to work eight hours a day. Represent this decision in a suitably labelled graph. (Assume convex preferences) 4. The worker is taxed a lump sum of £30. Show the effect on the budget curve graphically. Would labour supply go up or down? 5. Return to the scenario in question 3. The worker's wage increases from £10 an hour to £12.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter1: Ten Principles Of Economics

Section: Chapter Questions

Problem 6PA

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Title 1. Suppose that the indifference curves between consumption and leisure are concave to the origin.... Description 1. Suppose that the indifference curves between consumption and leisure are concave to the origin. How many hours will a person allocate to leisure activities? 2. Suppose that the price of goods purchased in the marketplace rises. What is the impact of this price increase on the worker's reservation wage, on the worker's probability of entering the labor force, and on hours of work? 3. What happens to a worker's desired hours of work if employers pay an overtime premium equal to "time and a half'(that is, 1 .5 times the straight-time wage) for any hours worked in excess of 40 hours? What would happen to hours of work if the overtime premium were raised to double the straight-time wage?
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