In: Economics
a) Unclear
In this case, the opportunity cost of leisure will increase,
therefore incentivising higher working hours due to substitution
effect. However, we are not sure about the income effect. If the
income effect is positive i.e. the wage increase helps the
individual to reach a target level of income, the working hours
will increase. However, there exists a possibility that the target
income level is achieved by lesser working hours as the wage per
hour increases leading to negative income effect. If the overall
negative income effect> positive substitution effect, the
working hours will decrease.
b) Decrease
Due to the inheritance, worker's preferences will change resulting
in the labor valuing leisure at a higher value than before and may
substitute leisure for labor.
c) Unclear
Vinitha will only increase the working hours if the new wage
offered is greater than the value of her leisure time (which is not
given, it can only be inferred that it is greater than 15)