Part a

Suppose that the owner of Boyer Construction is feeling the pinch of increased premiums associated with workers' compensation and has decided to cut the wages of its two employees (Albert and Sid) from $20 per hour to $18 per hour. Assume that Albert and Sid view income and leisure as "goods," that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each workers opportunity set for each hourly wage. At the wage of$20 per hour, both Albert and Sid are observed to consume 14 hours of leisure( and equivalently supply 10 hours of labor). After wages were cut to $18, Albert consumes 12 hours of leisure and Sid consumes 16 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $18 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours?

Part b [20 points]

Given the information in part a, suppose after wages were cut to $18 from $20 Albert consumes 16 hours of leisure and Sid consumes 12 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $18/hr. Explain the seemingly contradictory results that the workers supply a different number of labor hours after the wage cut but supplied the same number of hours before the wage cut.