Jack has 16 hour available to work in the day, his wage rate is $25 per hour, and he has nonlabour income $100 per day. He commutes to office every work day by bus which cost $50 for the round trip and spends 2 hours on commuting the round trip. Part (a): Using a work-leisure diagram, depict the individual’s labour supply choice, including their reservation wage. Part (b): Analyze the impact of an increase in commuting costs from $50 to $70 per round trip on his participation and hours decision. What is commuting time increase from 2 hours to 4 hours keeping the commuting cost same as before.

Jack has 16 hour available to work in the day, his wage rate is $25 per hour, and he has nonlabour income $100 per day. He commutes to office every work day by bus which cost $50 for the round trip and spends 2 hours on commuting the round trip. Part (a): Using a work-leisure diagram, depict the individual’s labour supply choice, including their reservation wage. Part (b): Analyze the impact of an increase in commuting costs from $50 to $70 per round trip on his participation and hours decision. What is commuting time increase from 2 hours to 4 hours keeping the commuting cost same as before.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.3P

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