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Income and Substitution Effects 25. Consider Figure 6-7, which depicts a wage decrease. The original constraint is line abc. The new constraint is line abd.
Income and Substitution Effects 25. Consider Figure 6-7, which depicts a wage decrease. The original constraint is line abc. The new constraint is line abd. Y ($) 2700 C U2 2400 2100 1800 1500 d (L = 225, Y = 1350) 1200 (L = 250, 900 (L = 177, Y = 1061) ! (Y = 750) 600 300 0 0 100 200 300 400 400 300 200 100 H Figure 6-7 25a. By how much has the wage decreased? 25b. What is the income effect of the wage decrease? What is the substitution effect of the wage decrease? 25c. Find the coordinates of two points on this individual's labor supply curve. Is the labor supply curve upward or downward sloping over the range of the wage change
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