This figure depicts a model of labour supply and consumption for the US in 1900 and 2013. The wage rate is shown to have increased between the two years. Which of the following are true? (Ignore the dashed orange line) IC Consumption ($) 300 225 150 75 0 8 10 12 16₂ 14 D 16 18 Hours of free time 20 a. The income effect dominates the substitution effect, leading to a reduction in the hours of work. b. According to this model, Americans work more and consume more in 2013 than in 1900 c. The substitution effect dominates the income effect, leading to an increase in the hours of work. d. According to this model, Americans consume more and enjoy more free time in 2013 than in 1900 22 24
This figure depicts a model of labour supply and consumption for the US in 1900 and 2013. The wage rate is shown to have increased between the two years. Which of the following are true? (Ignore the dashed orange line) IC Consumption ($) 300 225 150 75 0 8 10 12 16₂ 14 D 16 18 Hours of free time 20 a. The income effect dominates the substitution effect, leading to a reduction in the hours of work. b. According to this model, Americans work more and consume more in 2013 than in 1900 c. The substitution effect dominates the income effect, leading to an increase in the hours of work. d. According to this model, Americans consume more and enjoy more free time in 2013 than in 1900 22 24
Chapter30: The Labor Market
Section: Chapter Questions
Problem 14E
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