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Unformatted text preview: o If non-labor income, opportunity cost of leisure o If wage , leisure more expensive If wage , 2 effects; o 1. Income effect (similar to non-labor income) more leisure (work less) o 2. Substitution effect- leisure expensive less leisure (more work) o 3. Net effect= income effect+ substitution effect If wage o 1. Inc. effect: work more o 2. Subst. effect: leisure cheaper: more leisure (work less) o 3. Net effect= income effect + substitution effect Net effect of wage : o More work? o Less work? o Work same? o Men aged 25-55: income effect + substitution effect are about the same size o w > work full time Labor supply curve o Labor- supply elast. = % Ls/ % wage o backward-bending labor supply curve o Elast. <0 o Inc. effect> subst. eff....
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- Fall '08