Contemporary Labor Economics 9th Edition by Campbell Mcconnell, Stanley Brue, David Macpherson, Robert Powell, David Colander

Exercise 4

In Figure 7.6 the reduction in the cost of fringe benefits resulted in an increase in the amount of fringe benefits and a reduction in the wage income received. Redraw the worker's indifference map to demonstrate a circumstance in which fringe benefits would not go up by as much, but wage income would increase. Explain the difference between the two situations.