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Labor Supply
Review Problems
Problem 1.1:
Why can a worker's budget constraint for leisure and all other goods only pivot
around one end?
[Solution]
Problem 1.2:
How does a decrease in wages affect workers' decisions between leisure and
labor?
[Solution]
Problem 1.3:
What set of circumstances would generate a backward-bending labor supply curve?
[Solution]
Problem 1.4:
Why is there a tradeoff between leisure and consumption, and not between labor
and leisure?
[Solution]
Problem 1.5:
What happens to labor supply if the wage increases, and the labor supply curve
is backward-bending?
[Solution]
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