Question

Hedonic model of labor supply uses indifference curves and budget constraint. What affects would safety mandates have on employers and how would they react?

Answer 1

Safety mandates will make it make it more expensive for the employers to produce the same quantity of goods that they used to produce initially. Thus, their budget constraints will pivot inwards. This would mean that the indifference curve that was tangent to the initial budget line is no more the optimum indifference curve. Thus, the indifference curve which provides the optimum level of utility will be to the left of the old indifference cure and would thus provide lesser utility