LABOR ECON-CONNECT ACCESS
8th Edition
ISBN: 9781264604197
Author: BORJAS
Publisher: MCG
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Chapter 2, Problem 9P
(a)
To determine
Compare the life cycle path of hours of work between the two workers P and B, when B receives a one-time unexpected inheritance at the age of 35.
(b)
To determine
Compare the life cycle path of hours of work between the two workers P and B, if B is always aware that the he would receive a one-time inheritance at the age of 35.
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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?
The absolute value of the slope of the consumption-leisure budget line is the after-tax wage, w. Other workers earn w for up to 40 hours of work each week, and then w thereafter as at a second job which pays the same hourly wage as than their primary job.
Assume a worker has 168 hours per week and chooses to work 40 hours at the primary job and does not work at a second job. Graph the worker’s budget line and leisure and income at the utility-maximizing level.
Assume the primary employer offers the worker an opportunity to earn time-and-a-half working overtime. The overtime pay kicks in after the employee works 40 hours. Graph the old and new budget line and indicate both the number of hours worked and the income earned.
Jeff, Alan, and Katie all work for the same employer at an hourly wage rate of wo-$24.
All three of them have T=100 hours of weekly time endowment and non-labor income of IN=$0. Their
preferences over consumption and leisure are as follows:
= cl²
Jeff: U (c, l)
Alan: U(c, l) = min {c, 241}
Katie: U(c, l) = c +221
Based on the consumption-leisure model, solve for Jeff, Alan, and Katie's optimal
consumption and leisure choices: (c†, lj), (C‚ lå), and (ck, lk), respectively. For each worker,
graphically illustrate their optimal consumption and leisure choices by drawing the indifference
curve and budget constraint and labeling their respective optimal bundle (use separate graphs for
each worker). What are the optimal working hours for each worker?
Chapter 2 Solutions
LABOR ECON-CONNECT ACCESS
Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQ
Ch. 2 - Prob. 11RQCh. 2 - Prob. 12RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - A worker plans to retire at the age of 65, at...Ch. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15P
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