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a) Th e diagram above shows the income-leisure budget constraints faced by a worker. i. Based on this diagram, draw the labour supply curve for
a)
Th
e diagram above shows the income-leisure budget constraints faced by a worker.
i.
Based on this diagram, draw the labour supply curve for this worker, using the
three wages you can see. (Hint: use the y
-intercepts to find the wages.)
(5
marks)
ii.
When the worker is at point B, on indifference curve I
2
, a 50% rise in wage
sees them move to point C, on indifference curve I
3
. Explain why, when the
worker's wage
rises
, they
actually work
fewer
hours at point C.
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