Discuss how each of the following events affects the number of hours the individual would like...

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Economics

Discuss how each of the following events affects the number ofhours the individual would like to work(increase/decrease/unclear/no change). For full credit, your answermust explain why things change using the terminology of laborsupply theory. If the effect is theoretically ambiguous explainwhy. Depending on the question, you may need to discuss incomeeffects, substitution effects, diminishing returns to income,diminishing returns to leisure and/or the labor/leisure tradeoff.(6 pts)
Shogher gets a raise so she makes $25 per hour instead of $20per hour.
Todd inherits $1,000,000. His wage stays unchanged at $40 perhour.
Vinitha doesnâ€™t work initially because the best wage offer shehas received is $15 per hour and she values her leisure time morethan that. One day, she gets a wage offer of $25.

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3.6 Ratings (403 Votes)

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 See Answer

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