ANswER EACH OF QUESTIONS ?TO, 3 CAREFULLY. IF YOU CHOOSETO ANSwER THE BONUS QUES
ID: 1164971 • Letter: A
Question
ANswER EACH OF QUESTIONS ?TO, 3 CAREFULLY. IF YOU CHOOSETO ANSwER THE BONUS QUEST?ON. ITS POINTS wiLL BE ADDED TO?OUR GRADE. indu CHOOSE NOT TO ANSWER IT, YOUR GRADE WILL NOT BE AFFECTED NEGATIVELY . · YOUR TOTAL POINTS EARNED wILL BE A MAXIMUM OF 60 POINTS. Question 1 (20 pts): Explain each of the following concepts: 1. Labor force participation rate. 2. Reservation wage. 3. Non-intersecting indifference curves. 4. Substitution effect. S. The equali ty of the marginal rate of substitution between consumables and leisure, and the market wage rate as an equilibrium condition. Question 2 (20 pts): Ali's preferences for consumables (C) and leisure (L) are in the form: There are T-160 hours in the week available to split between work and leisure. Ali earns a wage of $10 per hour after taxes. He also receives $400 worth of welfare benefits each week regardless of how long he works (a) Graph Ali's budget line showing both intercepts and slope. (b) What is the value of Ali's reservation wage? (Hint: It is the MRS at the endowment point) (c) Find Ali's optimal amounts of consumables (C') and hours of labor supplied (h d) Show algebraically that the level of utility at Ali's endowment point is less than at his optimal levels of consumables (C') and leisure (L) Queston 3 0o pay Phopt rph hf iome d explin ach of thc flowing situations: The effect of a decrease in the market wage rate on the hours of labor supplied by worker, assuming the worker perceives leisure as an inferior good. a) b) The effect of on the hours of labor supplied, assuming the worker perceives leisure as a normal good and where the substitution effect precisely cancels out the income effects of an increasing wage and non-labor income. With the assistance of a properly labeled graph, explain the effect of introducing a cash grant to a single mother on her hours of labor supplied, if the grant is reduced by a percentage (a) of each dollar earned in labor income. In other words, show whether you would expect her hours supplied to increase or decrease and explain WHY nus Question (10 pts): END OF QUESTIONSExplanation / Answer
There are many questions and subpart. As per Chegg policy will answer first question
A shows section of population which constitutes labour force out of total working age population
2 is the lowest wage at which worker is ready to sell his labour service
3 non intersecting indifference curves are those which do not intersect because they represent different levels of satisfaction
4 substitution effect is the change in OPPUTUNITY cost of labour due to changes in wage rate
5 This leads to optimal income and leisure.