1). Time or Money: Which Do You Enjoy More?

a). Describe verbally and graphically the process by which a labor supply curve is constructed. Assume that leisure is a normal good.

b). Illustrate and explain verbally the decomposition of the total change in hours due to a change in the wage rate into a substitution and income effect for the case where the labor supply curve is backward bending.

c). What happens to the substitution and income effects for a wage rate change when leisure is not a normal good, but an inferior good? What does the labor supply curve look like?