Workshop7.P&R.KEY

Workshop7.P&R.KEY - As some people's per hour wages...

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As some people's per hour wages go up, they actually choose to work less and leisure more. Explain whether this is rational economic behavior. An increase in the hourly wage leads to increase in income. As income levels rise, workers become richer and need time to enjoy their new found wealth. Subsequently, they substitute leisure for work. The backwards bending supply curve indicates that, there is a positive relationship between increasing wages and number of hours worked to a certain point. Beyond this point, the relationship becomes negative. The negative portion of the curve, indicates that, as wages increase, workers work less hours. In terms of indifference curve analysis, as wages rise, the budget line moves to the right, thereby placing a workers on a higher indifference. The higher curve indicates a greater worker satisfaction with income (wages). They therefore want to spend more time away from work enjoying their gains. As one is paid time-and-a-half for nights or weekends, they choose to work more. Explain whether this is a rational economic behavior. Overtime pay represents an increase in the wages of workers, which leads to an increase in incomes. As income increases, consumers are able to afford more goods and services which
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Workshop7.P&R.KEY - As some people's per hour wages...

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