Question

1. Tom Hanks starred in a movie called Castaway. At the beginning, he lives near the beach, hoping to be rescued, but it means he currently has to carry drinking water from a stream a half-mile away. As hopes of being rescued fade, he decides to move closer to the stream, so he will not have to carry the water supply so far each day. Analyze the effect of moving closer to a water supply on the allocation of time between leisure and work (what kind of work?). Carrying water, of course is “work”. In order to do this analysis, please use a graph with a “budget line” before and after the move to help you think through the problem. Although this is a movie, are there REAL LIFE implications of this analysis? Explain.

2. Advances in technology have been made to make household work easier. If this is true, explain why time spent in household production over the past 50 years has not drastically declined. Why was there such a difference over the past 100 years? Be sure to discuss all the effects that might contribute to the lack of responsiveness of household production time to technology.

3. The following statement is based on empirical evidence that has been true historically (but will not necessarily always be true!). Please explain why the following statement has been true: In a heterosexual married couple, if the husband receives a raise, it prompts an increase in leisure for the wife. However, if the wife receives a raise, it tends to increase her time in the market place.

4. On a graph, explain the difference between the production substitution effect and the consumption substitution effect of a wage change.

5. Let’s say that the invention of indoor plumbing and central water heating decreases the time it takes to bathe by two hours a week. Before these advances, a typical person spent 4 hours a week bathing. However, when these advances came to pass the amount of time spent bathing per week did not decline. In fact, people actually spent 4.5 hours a week bathing. How can this be? Please explain. There are at least two reasons.

Answer 1