ECON 2A03 Lecture Notes - Lecture 9: Old Age Security, Budget Constraint, Lump Sum
9 Nov 2017
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Consider an individual with of annual non-labour income. 52x80=4,160 h per week (i. e. time endowment t=4160) her current wage rate is per hour a chooses to work 2000 hours a year. Draw a labour-leisure diagram, carefully illustrating her current labour supply. Non-labour income - , time endowment= 4160h w0=, h0=2000. Leisure e of 80h per week, for ur and she currently. The wage rate rises to and she decides to work 2040h. At per hour, is she worked 2200 have been indifferent to her original work decision in part a. show her new choice on a diagram income and substitution effects associated with the waage change. If h=2200, she would be indifferent to her work decision in part a. Income effect is negative, you should work less; leisure is a normal good. Total effect - income effect = sub effect. Calculate the compensated and uncompensated elasticities of labour supply implied by her resp increase.
