Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134643175
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 16, Problem 9RQ
To determine
The marginal rate of transformation and the marginal rate of substitution.
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Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If your money wage doesn’t increase, you may work more hours because of this cost-of-living increase. Is this response predominantly an income effect or a substitution effect? Explain. with simple example
Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If your money wage doesn’t increase, you may work more hours because of this cost-of-living increase. Is this response predominantly an income effect or a substitution effect? Explain.
Please help me find the marginal rate of substitution.
Chapter 16 Solutions
Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (9th Edition) (Pearson Series in Economics)
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- Find the marginal rate of substitution for Household A.arrow_forwardThe demand curve for labor will shift upward and to the left if labor becomes more productive. TRUE OR FALSE If total utility increases as wealth increases, the first derivative of the utility function is negative. TRUE OR FALSEarrow_forwardA worker has 110 hours available in a week that can be used for leisure (L) or work (h). The utility function is U = (1 - α)ln(C) + α ln(L), where C is consumption. a) The price per unit of consumption is 1, the hourly wage is w, and the worker has a non-labor income of V. Show that the labor supply is: h* = (110(1-a)- (av)/w). Also, find the demand for consumption and leisure. b) What is the effect on labor supply of i) an increase in the hourly wage and ii) an increase in non-labor income? c) Set α = ½. What are C, L, and h when w = 200 and V = 10000? What is the reservation wage? d) What is the effect on labor supply of i) a 30% income tax and ii) a 10% wealth tax (on V)? e) What is the labor supply if V increases to 11600? f) An increase in V to 11600 gives the worker the same utility as w = 250 and V = 10000 (you do not need to show it). What are the income, substitution, and total effects on labor supply of an increase in wage from 200 to 250 while V remains at 10000?…arrow_forward
- Consider the labor–leisure budget constraint curve on the graph. This curve shows trade‑offs between income and leisure that must be made over the course of one week. Assume there are no artificial barriers to limits on hours worked and that the wage is $25 per hour. Determine the vertical and horizontal intercepts. vertical intercept: $ horizontal intercept: harrow_forwardSuppose that a firm cannot give up one input in exchange for the other and still maintain the same level of output. Calculate the elasticity of substitution in this case and elaborate on your answer.arrow_forwardIf the economy uses inputs efficiently, then (pls select all that applies) Group of answer choices a) MRTS = 1. b) MRTS must be equal to the slope of a firm’s isoquant curve. c) the ratio of input marginal products must be equal to the ratio of input prices. d) the quantity of one output cannot be increased without decreasing the quantity of the other. e) every firm’s MRTS is equal to every consumer’s MRS. f) every firm’s MRTS is equal to the ratio of input prices. g) MRTS = MRT. h) outputs are on PParrow_forward
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