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People decide how to “budget” their time in much the same way that they decide how to budget for different goods. Each person decides how much they “value” their leisure time versus their work time. The more people work, the more they tend to value their remaining leisure time. This is the justification for paying overtime to people working over 40 hours per week.
(a) How might we model this trade-off economically using the basic labor supply model by showing the budget line and utility curves or indifference curves? In your graph of the basic labor supply, be sure to identify the optimum point of the budget line and the indifference curve.
(b) Suppose that the government imposes a tax on labor. If a tax is imposed on labor, the worker will perceive this tax as a reduction in his or her wage. For every hour worked, the individual worker receives a lower return on his or her labor. Demonstrate the effects of this tax on labor supply using the graph in part a showing a graph of the income effect and the substitution effect. That is, there are two graphs. Summarize the impacts of this tax on labor.
In an economy where the equilibrium rate of return on assets is 5 per cent per year, suppose there are three assets A, B and M. A is an acre of land and has an annual cash flow of $50 (received at the end of the year) and is not expected to appreciat..
What key element of a social network distinguishes it from a pure agglomeration or an industrial complex? How can we use the long-run prisoner’s dilemma to better understand why this may happen?
Dianna has a choice between lobster and steak for dinner. The lobster dinner costs $30, and gives her utility of 60, while the steak dinner costs $20 and gives her utility of 50. Which should Dianna choose? Robert spends all his income on dancing sho..
A consumer deposits of $1,000 in currency into her checking account. The bank sets aside $200 aside as required reserves (i.e. assume a 20% minimum reserve requirement), and then makes a loan of $800 to a new borrower.
Creativity, curiosity and creating value are key parts of the entrepreneurial mindset that won’t always prevent failure. Which of the following will help you avoid failure?
International trade has pros and cons. Economists generally supports free trade. International trade has played a significant part in promoting economic development and technology transfer among countries. There are also various arguments in favour o..
Your firm has been offering a combination of salary and stock options for employees. An entry level electrical engineer earns $75,000 plus $25,000 in stock options. Your accountant tells you this is cheaper than paying him only in salary. Explain why..
What would you argue are the main forces of globalization? Localization? Which forces are more powerful (globalization or localization), or does it depend on the context?
A medical device company has a monopoly on a certain class of cardiac implants. Demand for the implants is given by P=28000-5Q and marginal revenue is given by MR=28000-10Q. Give the profit after calculating the profit-maximizing price and quantity. ..
You decided to purchase a new hummer for 60,000. If the dealer offers a $5000 rebate, what would your monthly payments be if your interest rate is 6.5% and you pay it off in 4 years?
You need both equations and clearly labeled graphs (separate graphs for each question) to answer the following questions. Assume that b=1/2 and that initially the real interest rate is equal to the marginal product of capital at 3%. How much will thi..
Consider following claim: price of gasoline has doubled and corresponding change in demand gravely hurt those who have long commutes to work. As a student of economics what do you find correct and what incorrect in this claim.
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