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Economics p3 post ur doubts here..:)

David Hussey

David Hussey

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angel404 said:
at any income level,any person would want to substitute leisure for work(substitution effect).so this substitution effect would make the person want to work more,so the person would work more for more income,hence positive substitution effect.he(assuming its male) also would like to stop working and enjoy his money with the little extra income he gets.(income effect).so this income effect would make him want to work less as he gets more money.so the income effect is negative,i.e,it make him want to reduce the number of hours worked.

at low income,sub effect is greater than inc effect as the person really needs the extra money,so would work more to earn more.so sub effect is greater than inc effect. at higher income levels, the person would rather like to work less as it is pointless to have so much money without having time to enjoy it.so inc effect is greater than sub effect.
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ok so above wage OW
the guy has earned enough money and wants to spend his money in leisure that means his income effect is greater than sub effect right? which would mean inc one is + and sub is -
so why not B???
 
angel404

angel404

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David Hussey said:
ok so above wage OW
the guy has earned enough money and wants to spend his money in leisure that means his income effect is greater than sub effect right? which would mean inc one is + and sub is -
so why not B???
Click to expand...
nooo...inc effect is greater but it is negative as it would make the person want to reduce hours worked....income effect has a negative effect on quantity supplied of labour (hours worked)
sub effect makes the person want to work more...it has a positive effect of quantity supplied of labour(hours worked)
at lower levels of income,sub effect(+)>income effect(-)(hence early part of curve slopes upwards as it has a + gradient) while at higher levels inc effect(-)>sub effect(+)(hence eventually curve slopes downwards as it has a - gradient)
 
David Hussey

David Hussey

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angel404 said:
nooo...inc effect is greater but it is negative as it would make the person want to reduce hours worked....income effect has a negative effect on quantity supplied of labour (hours worked)
sub effect makes the person want to work more...it has a positive effect of quantity supplied of labour(hours worked)
at lower levels of income,sub effect(+)>income effect(-)(hence early part of curve slopes upwards as it has a + gradient) while at higher levels inc effect(-)>sub effect(+)(hence eventually curve slopes downwards as it has a - gradient)
Click to expand...
i already got it
thnx anywayss :)
 
U

unique111

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