3. (a) The income effect of a wage rate increase will labor supply, and the substitution...

3. (a) The income effect of a wage rate increase will labor supply, and the substitution effect of a wage rate increase will labor supply.

A. increase B. decrease C. not change

Therefore, the total effect of a wage rate increase on labor supply is .

A. positive B. negative C. ambiguous

(b) Increasing the overtime wage rate is often considered as an effective way to increase employees working time during a relatively short period, such as one week. Explain the reason using consumer choice tools, i.e., budget lines and indifference curves.

Expert Solution

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Rahul Sunny answered 6 months ago

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