Question

13. If leisure is a normal good and the wage falls A. B. C. D. the substitution income effect will induce the consumer to take more leisure. the substitution effect will induce the consumer to take less leisure and the income effect will induce the consumer to take more leisure. the substitution effect will induce the consumer to take more leisure and the income effect will induce the consumer to take less leisure. the substitution effect will induce the consumer to take less leisure and the income effect will induce the consumer to take less leisure. effect will induce the consumer to take more leisure and the 14. The substitution effect graphically is always denoted A. by movement along the original indifference curve, whereas the income effect is represented by a parallel shift of the budget line B. by moving in the direction of the item that is becoming relatively more expensive. C. by moving in the direction of the item that is becoming relatively cheaper and the D. income effect is always denoted by a rotating budget line. by movement along the original indifference curve, whereas the income effect is represented by a rotation of the budget line If a person is a participant and a wage decrease results in them leaving the work force, the wage rate resulted in A. an income effect only. B. a dominant substitution effect. C. a substitution effect only D. reinforcing income and substitution effects An increase in an individual's non-labour income will A. cause an decease in the reservation wage. B. cause an decease in the reservation wage, if leisure is an inferior good. C. cause an increase in the reservation wage, if leisure is a normal good. D. cause an increase in the reservation wage, the individual is a participant. 16. At the utility maximizing level of leisure A. B. C. D. 17. the price of time is irrelevant the leisure time is maximized the marginal rate of substitution equals the wage the level of income is irrelevant 18. In the wage/labour diagram the firm's isoprofit curve shows A. Wage/employment combinations that maximizes profits. B. Wage/employment combinations that maximizes revenue. C. Wagelemployment combinations that minimizes profits. D. Wage/employment combinations that hold profits constant.

needed all the answers for the questions

Answer 1

Q13) option c).

As wage falls, substitution effect says to work less & income effect says to work more , bcoz wage fall has resulted in fall in income

Q14) option c)

Income effect is shown by rotating the budget line.

Now for substitution effect, utility level is constant, so we move only along the IC ,in a direction of good, that had become relatively cheaper.

Q15) option B)

As wages fall, & Labor has withdrawn from the market, so substitution effect is dominant than the income effect , which says that labor should work & not withdraw from the market, bcoz income has already reduced.

Q16) option C)

As non Labor income has risen,so the minimum wage level demanded rises, so reservation wages rise.

Only when leisure is considered a normal good.

Q7) option C)

At eqm, MRS = wage

Slope of IC = slope of budget constraint

Q18) option D)

Isoprofit imply a constant level of profits