Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. Draw Leandro's time allocation budget line for a typical day, with income on the vertical axis and hours of leisure on the horizontal axis. Leandro's decision to work less as the wage rate falls is the result of a substitution effect and an income effect. In your diagram, show the income effect and the substitution effect from this reduced wage rate. Which effect is stronger?
Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. Draw Leandro's time allocation budget line for a typical day, with income on the vertical axis and hours of leisure on the horizontal axis. Leandro's decision to work less as the wage rate falls is the result of a substitution effect and an income effect. In your diagram, show the income effect and the substitution effect from this reduced wage rate. Which effect is stronger?
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Related questions
1. Because many men traditionally have not produced a lot of household commodities
| a. | they are more likely to reduce hours of work after a decrease in their wage rate |
| b. their income effect is likely to be smaller than that of women |
| c. they can more easily substitute leisure for household production |
| d. | they are less likely to reduce hours of work after a decrease in their wage rate |
2. One of the main changes in the typical family in the United States over the past 30-40 years has been
| a. non-marital births have decreased appreciably |
| b. marriage has declined while cohabitation has risen |
| c. single-parent families have fallen considerably |
| d. median age at first marriage has decreased |
3. A single mother is currently paying childcare cost of $10 an hour and she works 8 hours a day. The government then decides to provides child care at a constant $80 a day. The effect of this event will be to:
| a. cause the mother to work more hours |
| b. cause the mother to work less hours |
| c. cannot tell without knowing which effect dominates: the income or substitution effect |
| d. cause the mother to work the same hours |
4. Which statement correctly describes the relationship between Marriage and Poverty?
| a. poverty as a whole can be solved by people just having children |
| b. Children who grow up in a dual parent household are significantly more likely to experience poverty |
| c. Children who grow up in a dual parent household are significantly less likely to experience poverty |
| d. poverty as a whole can be solved by people just staying married |
5. The real determining "discriminatory" factor in higher education today is
| a. | "out of state" status |
| b. | race |
| c. income |
| d. gender |
