homework 4 presentation

homework 4 presentation - HOMEWORK 4 Graphs and...

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HOMEWORK 4 Graphs and Explanations
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Consumption p w T     p w p w T C T p w C T w wn pC T n n T Leisure p w T * Work Leisure
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C p w T Reduction in Wages: 1. Substituion Effect: Opportunity cost of leisure goes down, more demand more leisure 2. Income effect Income goes down and people demand less leisure as Leisure is normal good If Substitution effect is bigger than Income effect, People will demand more leisure and will work less Leisure T *   p w T * *
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C p w T Reduction in Wages: 1. Substituion Effect: Opportunity cost of leisure goes down, more demand more leisure 2. Income effect Income goes down and people demand less leisure as Leisure is normal good If Substitution effect is less than Income effect,
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