Question

William receives $100 in dividends each week. He earns an hourly wage of $20 per hour....

William receives $100 in dividends each week. He earns an hourly wage of $20 per hour. Assume that there are 168 hours available to William each week. William decides to work 42 hours per week at his current wage. When his wage increase to $25 per hour, William elects to work 37 hours per week. Use a diagram to show William’s initial combination of work hours and consumption, his new combination of work hours and consumption after the wage increase, and carefully decompose the change in work hours into substitution and income effects. (Note: for the income and substation effects I am just looking for a sketch of the diagram. So, for example, you will not be able to show me the exact sizes of the income and substitution effects because I did not give you a utility function).

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Sam receives a regular wage of $15 per hour for a 40 hour week. he...
1. Sam receives a regular wage of $15 per hour for a 40 hour week. he receives one and one-half his regular hourly rate for hours over 40 per week and twice his normal rate for Sundays and holidays. Last week Sam worked 62 hours including 8 hours on a holiday. Calculate Sam's gross pay. 2. Calculate Sam's social security and Medicare tax. 3. Assume Sam's federal income tax is $155, union dues are $7 and life insurance is $15.60....
.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...
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...
Your friend Conrad currently works in the local grocery store. He works 32 hours per week...
Your friend Conrad currently works in the local grocery store. He works 32 hours per week and is paid an hourly wage of $ 18 per hour. While he is not allowed to work more than 40 hours per week, Conrad can choose to work any number of hours between 30 and 40 hours. Conrad is going to get a raise to $ 20 per hour next week. When you relate this fact to your economics professor, he assures you...
Suppose you have 24 hours per day that you can allocate between leisure and working. (i)...
Suppose you have 24 hours per day that you can allocate between leisure and working. (i) Draw the budget constraint between “leisure hours” on the horizontal axis and “wage income” on the vertical when the wage rate is $40 per hour. Mark an optimum point A that is meaningful. Draw a new budget constraint when the wage rate falls to $30 per hour. Show a new optimum point B. (ii) On your indifference curve diagram, decompose the effect of the...
Suppose that you have a job with a wage of $25 per hour. The job is...
Suppose that you have a job with a wage of $25 per hour. The job is extremely flexible: you can choose to work any number of hours from 0 to 2,000 per year. The income tax system is as follows. •Income up to $10000: no tax. •Income from $10000 to $30000: 20% tax rate. •Income from $30000 up: 30% tax rate. (a) Draw a graph in leisure hours/consumption space, showing your opportunity set with and without the tax system. Label...
John’s utility function is represented by the following: U(C,L) = (C-400)*(L-100), where C is expenditure on...
John’s utility function is represented by the following: U(C,L) = (C-400)*(L-100), where C is expenditure on consumption goods and L is hours of leisure time. Suppose that John receives $150 per week in investment income regardless of how much he works. He earns a wage of $20 per hour. Assume that John has 110 non-sleeping hours a week that could be devoted to work. a.Graph John’s budget constraint. b.Find John’s optimal amount of consumption and leisure. c.John inherits $300,000 from...
Ira’s only source of income is from working. He can work as many hours per day...
Ira’s only source of income is from working. He can work as many hours per day as he wishes (up to a maximum of 24 hours) at a fixed wage rate of $10 / hour. b. Suppose, that the government introduces a tax rate of 50 cents in the dollar. Suppose that leisure is a normal good that tax ends up reducing Ira’s hours worked. Show in your diagram the effect of the tax on Ira’s budget constraint and possible...
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...
Ira’s only source of income is from working. He can work as many hours per day...
Ira’s only source of income is from working. He can work as many hours per day as he wishes (up to a maximum of 24 hours) at a fixed wage rate of $10 / hour. a. Initially, assume that there is no income tax.   Draw Ira’s budget constraint. b. Now suppose, that the government introduces a tax rate of 50 cents in the dollar. Suppose that leisure is a normal good that tax ends up reducing Ira’s hours worked. Show...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT