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06.01.supply1 - BUEC 280 Lecture 9 Introduction to...

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  Prof. Simon D. Woodcock BUEC 280 Lecture 9 Introduction to Individual Labour Supply
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  Prof. Simon D. Woodcock Individual and Aggregate LS We’ve already seen measures of labour  supply at the aggregate (market) level Where does aggregate labour supply come  from? Individual decisions to work (and how much) Today: develop a basic theory of the  individual’s decision to work
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  Prof. Simon D. Woodcock The allocation of time Ultimately, the individual’s decision about whether and how  much to work is a decision about how to spend one’s time Four major categories of things we can do with our time: 1. Work (for pay) 2. Leisure  3. Household production (raising children, cooking, home  repair, growing vegetables, etc.) 4. Investing in “human capital” (i.e., acquiring skills/knowledge  that increase future earning capacity) In time, we’ll consider all of these. To begin, we’ll develop a  simple model where individuals choose between  work  and  leisure .
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  Prof. Simon D. Woodcock Labour vs. Leisure  Assume  people can allocate their time between two activities:  work (labour) and leisure T = total discretionary time (net of sleeping, eating, etc.) L = hours of leisure H = T – L = hours of work Choosing to work T – L hours at a given wage (i.e., labour  supply) is equivalent to choosing to consume L hours of  leisure So we can model  either  individual leisure demand  or   individual labour supply. They’re two sides of the same coin.
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