Q1

Figure 1 shows the indifference curves of a person in the neoclassical model of labour supply. On Figure 1 L denotes leisure hours, H denotes hours of work, Y denotes income, U1 and U2 denote indifference curves, and line abc denotes budget constraint. The convex shape of the indifference curves in Figure 1 means that: Figure 1 (S) 8 8 8 8 8 b 200 300 400 200 100 When leisure is high and income low, additional units of leisure are very valuable When leisure is high and income low, additional units of income are very valuable People generally prefer having much leisure and little income, or much income and little leisure, rather than having some leisure and some income. All of the above