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

Exercise 16

Employ a diagram similar to Figure 2.5 to show an individual's leisure-income choices before and after a wage rate decrease. Isolate the income and substitution effects, indicate whether each increases or decreases hours of work, and use the two effects to explain the overall impact of the wage decline on hours of work. Is your worker on the forward-rising or backward-bending portion of the labor supply curve