1. SUBSTITUTION AND INCOME EFFECTS OF A PRICE CHANGE
If the wage rate is $5 per hour, any hour spent at leisure is bought at the opportunity cost price of $5. if the wage rate is $6 per hour, an hour of leisure is bought for $6. ... This curve shows that as the wage rate increases from $10 an hour to $15 an hour, Alri increases the quantity of labour supply from 20 hours a week to 35 hours a week. But when the wage rate increases to$20 an hour, he reduces his quantity of labour supply to 30 hours a week. As wage rate increased, work hours decreased. ... As a result, the typical worker might choose to substitute more work hours for leisure hours...
- Word Count: 2161
- Approx Pages: 9
- Has Bibliography
- Grade Level: High School