Economics Question XA is the 10 hours leisure period YA is the $15 wage Question 2 Sara has a flatter I. C than Johnmeaning that Sara is spending less time, Hours, in leisure activities than John. John has a strong preference for leisure meaning that she does not like working; she will have steep indifference curves as shown (Fig 2.0a). John is prepared to give up his large amount of C to get more units of V. Figure 2.0a Sara has a strong preference for consumption. She has a flat indifference curve as in figure 2.0b.
She is willing to give up a small amount of C to maximize more units of leisure, V. Figure 2.0b Question 3 The individual will choose W’H. At this point, the individual has uses the same hours in leisure with WNH but will maximize his income. He has a higher income than when he is on WNH. Question 4 A taxi driver I. C A professor I. C Question 5 Figure 3 The slope of the I. C shows a diminishing MRS between C and V The diminishing MRS is attributed to the assumption of the diminishing marginal utility; and the additional utility that is derived from consuming 1 more unit of V will decrease as V increases.
At point marked B on figure 3.0, an individual has 6 units of C and 4 units of V. according to the relative abundance of C versus V an individual will sacrifice one unit of V to obtain additional units of C. V is a scarce commodity and V is the abundant commodity, and maintain a same utility level at A. At point D; the individual has 2 units of C and 15 units of V.
V versus C, the individual sacrifices 5 units of V to obtain additional units of C. The combination of V and C provides a higher utility level. Question 6 The individual will prefer a straight line pay of HW’; it will provide him with higher leisure time and at the same time provide higher wage. She will be working at h1 hours at her optimal leisure point. Question 7 a. Breakeven point 25000/25=1000. b. An arbitrary budget Question 8 The income effect shows that an individual can have a decent living standard while or she works less time.
When an individual moves from one indifference curve to the next the individual’s wage will increase, his working time reducing and his or her leisure time increases. Works Cited Carmichael, Richard. American Economic History: 2013 Edition. New York: CreateSpace Independent Publishing, 2013. Print.