Draw the indifference curves and budget line of that worker

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Reference no: EM132208491

Question: Assume optimum labor time of a worker is positive.

a) Draw the indifference curves and budget line of that worker. Show the optimum level of his labor time.

b) Assume the non-labor income of that worker has decreased. Draw on a second graph indifference curves, new and old budget line of the worker.

c) Assume wage rate of that worker has decreased and income effect is dominating the substitution effect. Draw a third graph showing this case. Show new and old budget lines. New and old optimum points.

d) Show on the same graph you have drawn on part c the income and substitution effects.

Reference no: EM132208491

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