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Unformatted text preview: Figure %: Consumption/Leisure Budget Constraint The indifference curves between leisure and all other goods would be similar to those we have seen in the goods and services market. We can combine a worker's budget constraint with his indifference curves to see how the worker would optimize the labor-leisure choice: Figure %: Optimizing the Consumption/Leisure Decision Just as a buyer's budget constraint pivots with a change in the price of one good, a worker's budget constraint can pivot with a change in the wage. If the wage increases, the curve pivots outwards (U3). If the wage drops, then the curve pivots inwards (U1). Note that the maximum leisure point is fixed, since there are only 24 hours in a day. In the graph below, you can see the inwards pivot that occurs when the wage level drops: workers cannot afford as many other goods as they could prior to the drop in pay....
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This note was uploaded on 02/09/2012 for the course ECO ECO2013 taught by Professor Jominy during the Fall '08 term at Broward College.
- Fall '08