2) Suppose Amy has an investment providing $100 per week in non-wage income and currently works in a job with a wage of $25 per hour.

a) Draw a budget constraint-indifference curve graph demonstrating that Amy maximizes utility working 30 hours per week. What is the slope of Amy's indifference curve at her utility maximizing point?

b) Suppose Amy's gets a raise to $35 dollars per hour. Show Amy's new utility-maximizing point demonstrating that Amy's labor supply curve is upward-sloping. Given Amy's response to the wage change, can you say whether the substitution effect of the wage change was bigger or smaller than the income effect? Explain.

c) Suppose now that Amy's non-wage income disappears (she now has $0 in non-wage income). Can you say whether Amy's hours of labor supplied will increase or decrease in response? Explain using the ideas of income and substitution effects