Question

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 and his sensitivityto changes in the wage? Can you graph Thomas’ labor supply curve.

Answer #1

Wage rate | Labor |

15 | 35 |

20 | 45 |

25 | 40 |

Elasticity of supply between $15 to $20= (%change in labor supply/% change in wage rate)

% change in labor supplied = [(45-35)/(35+45)/2] = (10/40)= 0.25

% change in wage rate = [(20-15)/(15+20)/2] = (5/17.5) = 0.28

Elasticity of supply = 0.25/0.28= **0.89**

Elasticity of supply between $20 and $25 = (% change in labor supply / % change in wage rate)

% change in labor supplied = [(40-45)/(40+45)/2] =(-5/42.5)= -0.12

% change in wage rate = [(25-20)/(25+20)/2] = (5/22.5)=0.22

Elasticity of supply = (-0.12/0.22)= **-0.54**

The labor supply is inelastic in both the wage rate ranges. But labor supply is positively sloped between $15 and $20 and Labor supply is negatively sloped between $20 and $25.

The labor supply of Thomas is backward bending supply curve.

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,...

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?

Wage rate is $10 per hour for a consumer, and he is choosing
earning of $10 per hour and taking leisure of 1 hour together.
a. Derive the mathematical equation and
draw the corresponding graph for daily income-leisure
constraint.
b. Draw the corresponding indifference
curve between earning and leisure.
c. How many hours will this
consumer work and how much will this consumer earn?

A shop sells 20 hats per week at $10 each. When it increases the
price to $12, the number of hats sold falls to 15 per week. Which
of the following statements are correct?
1. When the price increases from $10 to $12, demand increases by
25%.
2. A 20% increase in the price causes a 25% fall in demand.
3. The demand for hats is inelastic.
4. The elasticity of demand is approximately 1.25.

3. Suppose Jack’s wage rate is $20 and that he can produce $10
per hour of household “goods”. Suppose Jill’s wage rate is $30 and
that she can produce $15 per hour of household “goods”. Who should
specialize in the market sector? Suppose now, Jack’s wage goes up
to $25 per hour. How does this affect the answer?
4. Suppose the government grants $2500 per child to households
that have more than 2 children. How would this affect
fertility?

Alice's utility function is U ( C , L ) = C · L
She can work up to 80 hours each week and she has no non-labor
income.
1)If Alice's non-labor income is zero, what will Alice's
reservation wage be?
2)If Alice's non-labor income is $168 per week, what will
Alice's reservation wage be?
3)If Alice's non-labor income is zero, how many hours will Alice
work when wage is $20 per hour?
4)If Alice's non-labor income is zero, how...

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...

Lauren does not work and receives $500 per week in dividends and
interest from her vast financial empire. She is just as happy if
she works one hour per week to raise her income to $520, or works
two hours per week to raise her income to $544, or works three
hours per week to raise her income to $572, or works four hours per
week to raise her income to $604, as she is when she does not work...

Solving Moral Hazard by Lowering the Benefit Reduction
Rate
An individual can earn $15 per hour if he or she works. Assume
an individual can work up to 200 hours in a month, or not work at
all and consume 200 hours of leisure. Draw the budget constraints
that show the monthly consumption-leisure trade-off between the
following three welfare programs.
a. The government guarantees $900 per month in income and
reduces that benefit by $1 for each $1 of labor...

Action Travel has 10 employees each working 40 hours per week
and earning $25 an hour. Federal income taxes are withheld at 15%
and state income taxes at 6%. FICA taxes are 7.65% and unemployment
taxes are 3.8% of the first $7,000 earned per employee. What is the
actual direct deposit of payroll for the first week of January?
Group of answer choices $10,000. $6,755. $7,135. $5,990.

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 3 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 4 minutes ago

asked 9 minutes ago

asked 10 minutes ago

asked 10 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 15 minutes ago

asked 20 minutes ago