Question

Suppose H=0.5w-5 is Mary's labor supply curve, where H is hours of work per week and...

Suppose H=0.5w-5 is Mary's labor supply curve, where H is hours of work per week and w is the wage rate per hour. What is the "Reservation wage" for Mary that she requires in order to participate in the labor market at all? What is the wage elasticity of labor supply at w=100? Would Mary like to spend more hours on work if the wage rate increased to 150 per hour? why?

Homework Answers

Answer #1

When H = 0;
0 = 0.5w-5
So, 0.5w = 5
So, w = 5/0.5 = 10

Thus, reservation wage is 10 below which Mary will not participate in the labor market at all.

Wage elasticity of labor supply =

And, w = 100; H = 0.5w-5 = 0.5(100) - 5 = 50 - 5 = 45

So, Wage elasticity of labor supply = (0.5)*(100/45) = 1.11
The wage elasticity of labor supply at w=100 is 1.11

Yes, Mary would like to spend more hours on work if the wage rate increased to 150 per hour because hours of work per week is positively related to wage rate and also the labor supply is elastic which means that as wage rate increases then labor supply will increase.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
With an initial wage rate of $15 per hour, Thomas works 35 hours per week and...
With an initial wage rate of $15 per hour, Thomas works 35 hours per week and leisures the remaining 75 hours. When his wage increases to $20 per hour he works 45 per week and when the wage increases to $25 heworks 40 hours per week. What is Thomas’ labor supply elasticity as his wage increases from $15 to $20 and then from $20 to $25? What does this value tell you about the shape of his labor supply curve...
Consider the case where the demand curve and supply curve for unskilled labor are given in...
Consider the case where the demand curve and supply curve for unskilled labor are given in the following table: (1) Wage Rate (/hour) (2) Wage Rate2 (/hour) (3) Q of Labour Demanded (hrs/week) (4) Wage Rate2 (/hour) (5) Q of Labour Supplied (hrs/week) 8.5 1000 1900 8 1200 1800 7.5 1400 1700 7 1600 1600 6.5 1800 1500 6 2000 1400 5.5 2200 1300 1. What is the equilibrium wage rate? ____________ 2. What is the quantity of labor hours...
2. Henry works in a movie theater and his wage is initially $12 per hour and...
2. Henry works in a movie theater and his wage is initially $12 per hour and he usually works 30 hours per week. Henry’s boss gives him a raise and his wage increases to $15 per hour. Henry now decides to work 33 hours per week. (a) What is Henry’s labor supply elasticity? (b) Is Henry’s labor supply curve inelastic or elastic? Explain what this means in a few words. (c) Explain whether the income or substitution effect dominated after...
Karen works 50 hours per week. She can work legally as a book keeper and earn...
Karen works 50 hours per week. She can work legally as a book keeper and earn $50 per hour. Alternatively, she can work illegally by helping clients evade taxes for $150 per hour. Karen can only choose one occupation or the other. If she chooses illegal work, the probability of being caught is 0.3, and if caught, Karen will face a penalty of $150 per hour of illegal activity. (Note: if Karen is caught, she retains the proceeds from her...
.Curious George must decide how much to work. He has 60 hours per week available that...
.Curious George must decide how much to work. He has 60 hours per week available that he can spend either working or engaging in leisure (which for him is creating various kinds of mischief). He can work at a wage rate of $5 per hour. The Man with the Yellow Hat (who looks after George) also gives him an allowance of $100 per week, no matter how much George works. George's only source of income that he can use for...
Suppose that a worker’s utility (i.e., preferences) with respect to total income (Y) and hours of...
Suppose that a worker’s utility (i.e., preferences) with respect to total income (Y) and hours of leisure time per week (LT) can be represented by the following Cobb-Douglas utility function: U = Y0.4 ∙ LT0.6 (note: A=1; α=0.4; β=0.6) Assume that the market wage is $25 per hour of work (H), and his/her non-labor income is $300 per week. The worker has 70 hours per week to allocate between labor market activity and leisure time (i.e., T = 70). Given...
Arielis currently working 45 hours per week at $33 per hour when herboss raises herwage to...
Arielis currently working 45 hours per week at $33 per hour when herboss raises herwage to $37 per hour. Since leisure is now more expensive, the substitution effect guarantees that Arielwill work more hours at the new higher wage rate than she did at the old rate? True or False? You must prove your answer graphically.
Santi derives utility from the hours of leisure (l) and from the amount of goods (c)...
Santi derives utility from the hours of leisure (l) and from the amount of goods (c) he consumes. In order to maximize utility, he needs to allocate the 24 hours in the day between leisure hours (l) and work hours (h). Santi has a Cobb-Douglas utility function, u(c, l) = c 2/3 l 1/3 . Assume that all hours not spent working are leisure hours, i.e, h + l = 24. The price of a good is equal to 1...
Santi derives utility from the hours of leisure (l) and from the amount of goods (c)...
Santi derives utility from the hours of leisure (l) and from the amount of goods (c) he consumes. In order to maximize utility, he needs to allocate the 24 hours in the day between leisure hours (l) and work hours (h). Santi has a Cobb-Douglas utility function, u(c,l) = c2/3l1/3. Assume that all hours not spent working are leisure hours, i.e, h + l = 24. The price of a good is equal to 1 and the price of leisure...
A company has 600600 employees who work 150150 hours a month each. Each worker earns $18$⁢18...
A company has 600600 employees who work 150150 hours a month each. Each worker earns $18$⁢18 per hour. There is a profitable project the company would like to start, but it would require an additional 27,00027,000 working hours within three months to be completed, and all the employees are fully loaded with other projects. The company does not want to hire new staff; they would like the project to be completed by the current workforce instead. Given that the wage...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT