Reference no: EM133252204

1. Discuss how each of the following events affects the number of hours the individual would like to work (increase/decrease/unclear/no change). For full credit, your answer must explain why things change using the terminology of labor supply theory. If the effect is theoretically ambiguous explain why. Depending on the question, you may need to discuss income effects, substitution effects, diminishing returns to income, diminishing returns to leisure and/or the labor/leisure tradeoff.

1. Lauren gets a raise so she makes $25 per hour instead of $20 per hour.
2. Joe inherits $1,000,000. His wage stays unchanged at $40 per hour.
3. Pushkar doesn't work initially because the best wage offer he has received is $15 per hour and he values his leisure time more than that.  One day, he gets a wage offer of $25. 

2. Jasmine has a relatively low wage and no savings. Using the logic of labor supply theory to guide your answer, discuss the forces that influence Jasmine's decision of how many hours she wants to work.  If there are contradictory forces, make sure to mention that the ultimate effect is unclear. Your answer must use the logic of labor supply theory - answers just based on your own guesses will not receive credit.