Home works

Question 1

Suppose a person is offered a wage of$15 p/hour but chooses not to work:

A.) What do we know about this persons MRS?

B.) What do we know about this persons reservation wage?

C.) 2 possible effects of a wage increase. Discuss in terms of leisure & consumption

Answer 1

A.) MRS > Wage, MRS>$15 p/hour

B.) Reservation wage > $15 p/hour

C.) Start working: less leisure & more consumption

Continue not working: Same leisure & consumption