Question

In: Economics

Indicate in each of the following instances whether the specified circumstances will cause a worker to...

Indicate in each of the following instances whether the specified circumstances will cause a worker to want to work more or fewer hours:
1. The wage rate increases and the substitution effect is greater than the income effect.
2. The wage rate decreases and the income effect is greater than the substitution effect.
3. The wage rate decreases and the substitution effect is greater than the income effect.
4. The wage rate increases and the income effect is greater than the substitution effect.

Solutions

Expert Solution

Wage rate impacts Number of working hours and number of working hours depends upon Substitution effect and Income effect.

A.The wage rate increases and the substitution effect is greater than the income effect

Since wage rate increases;

Substitution effect : Due to increase in Wage rate , now worker will tend to work more by giving up leisure as Now working more will give higher reward.

Thus, Increase in Wage rate will make a Worker work more.

Income effect. : As wage rate increases, The income of Worker Increases .As the income Increases, Worked will work less as now while working less he can maintain its Income.

Thus, Increase in Wage rate will make a worker work less/ for few hours.

Now, Since Substitution effect is greater than Income effect, Increase in Wage rate will make Worker work more .

B..The wage rate decreases and the income effect is greater than the substitution effect.

As wage rate decreases,

Substitution effect : Due to decrease in Wage rate , now worker will tend to work less by as now working less have less reward and less incentive to work.

Thus, decrease in Wage rate will make a Worker work for few hours/ or less

Income effect. : As wage rate decreases, The income of Worker decreases. As income Decreases, Worker will work more as now in order to increase or maintain its income,a worker has to work more

Thus, decrease in Wage rate will make a worker work more .

Now, Since Income effect is greater than Substitution effect, Increase in Wage rate will make Worker work more .

C The wage rate decreases and the substitution effect is greater than the income effect.

As wage rate decreases,

Substitution effect : Due to decrease in Wage rate , now worker will tend to work less by as now working less have less reward and less incentive to work.

Thus, decrease in Wage rate will make a Worker work for few hours/ or less

Income effect. : As wage rate decreases, The income of Worker decreases. As income Decreases, Worker will work more as now in order to increase or maintain its income,a worker has to work more

Thus, decrease in Wage rate will make a worker work more .

Now, Since Substitution effect is greater than Income effect, Increase in Wage rate will make Worker work less or for few hours

d. The wage rate increases and the income effect is greater than the substitution effect.

Since wage rate increases;

Substitution effect : Due to increase in Wage rate , now worker will tend to work more by giving up leisure as Now working more will give higher reward.

Thus, Increase in Wage rate will make a Worker work more.

Income effect. : As wage rate increases, The income of Worker Increases .As the income Increases, Worked will work less as now while working less he can maintain its Income.

Thus, Increase in Wage rate will make a worker work less/ for few hours.

Now, Since Income effect is greater than Substitution effect, Increase in Wage rate will make Worker work less/for few hours.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Indicate by a (+), (-), or (0) whether each of the following events would probably cause...

Indicate by a (+), (-), or (0) whether each of the following events would probably cause average annual inventory holdings to rise, fall, or be affected in an indeterminate manner. Also provide an explanation for each event and the affects. (5 pts) a. Our suppliers switch from delivering by train to air freight. b. We change from producing just-in-time to meet seasonal sales to steady, year-round production. c. Competition in the markets in which we sell increases. d. The...

For each of the following errors, considered individually, indicate whether the error would cause the adjusted...

For each of the following errors, considered individually, indicate whether the error would cause the adjusted trial balance totals to be unequal. If the error would cause the adjusted trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. 1 The adjustment for accrued wages of $5,550 was journalized as a debit to Wages Expense for $5,550 and a credit to Accounts Payable for $5,550. --- A. The totals are equal....

For each of the following errors, considered individually, indicate whether the error would cause the trial...

For each of the following errors, considered individually, indicate whether the error would cause the trial balance totals to be unequal. If the error would cause the trial balance totals to be unequal, indicate whether the debit or credit total is higher and by how much. If the debit and credit totals would be equal, enter zero ("0") in the amount box. a. The payment of an insurance premium of $7,450 for a three-year policy was debited to Prepaid Insurance...

For each of the factors listed below indicate whether the factor, independently, is likely to cause...

For each of the factors listed below indicate whether the factor, independently, is likely to cause a particular income producing property to trade for a lower or higher CAP rate compared with an average property. For this question, no explanation is needed. Indicating “higher”, “lower” or “irrelevant” for factors a through g is sufficient. Lower volatility in rent prices and occupancy rates. Worse location High inflation environment High risk premium environment Market general higher than normal expected NOI growth Lower...

Indicate whether the following statements are "True" or "False" regarding the circumstances under which the cost...

Indicate whether the following statements are "True" or "False" regarding the circumstances under which the cost of repairs to the damaged property can be used to measure the amount of a casualty loss. a. The repairs do not extend beyond the damage suffered. b. The repairs are necessary to restore the property to its condition immediately before the casualty. c. The value of the property after the repairs, as a result of the repairs, exceeds the value of the property...

for each of the following oxides, indicate whether it is ionic or molecular and whether it...

for each of the following oxides, indicate whether it is ionic or molecular and whether it is acidic or basic. Then write a balanced equation for the reaction with the oxide and water. SO2(g), CaO(s), Li2O(s), SeO(s), P4O6(s)

In each of the following instances (i) tell whether the study is experimental or observational, (ii)...

In each of the following instances (i) tell whether the study is experimental or observational, (ii) tell whether the study is comparative or descriptive, and (iii) if the study is comparative, identify the response and explanatory variables. a) Annual rates of return on investment are compared among different groups of mutual founds. b) In a pilot phase of fund-raising campaign, a university randomly contacts half of a group of alumni by telephone and the other half by a personal letter...

QUESTION 5 Decide in each of the following instances whether the contract is valid, void or...

QUESTION 5 Decide in each of the following instances whether the contract is valid, void or voidable. Motivate your answers. 5.1 Grace orders an oval-shaped swimming pool to be delivered, but the pool company delivers a square-shaped pool. (2) 5.2 Rob phones Lindsay’s home number and makes her a job offer. The next morning Lindsay’s sister, Janine, comes to work for him. Rob discovers that the offer was made to the wrong person. (2) 5.3 A traditional healer tells his...

In each of the circumstances listed below, indicate, by appropriate letter, which of the following types...

In each of the circumstances listed below, indicate, by appropriate letter, which of the following types of opinions should be rendered on the entity's financial statements? Mix and match Each question should have a Letter by it (some answers will apply to multiple questions) A. Unmodified B. Qualified C. Adverse D. Disclaimer ___ 1. Departure from generally accepted accounting principles that is material but not pervasive. ___ 2. Going-concern uncertainties that may have a material (but not pervasive) effect on...

1. For each of the following circumstances, indicate wheter the calculated molarity of NaoH would be...

1. For each of the following circumstances, indicate wheter the calculated molarity of NaoH would be lower, higher, or unaffected. Explain your answer in each case. a. The inside of the pipet used to transfer the standard HCl solution was wet with water. b. You added 40 mL of water to the titration flask rather than 25 mL. c. The buret, wet with water, was not rinsed with NaOH solution before filling the buret with NaOH with solution. d. Five...

Subjects