A study by economists at the Federal Reserve Bank of Boston found that between 1965 and 2003 the average American's leisure time increased by between 4 and 8 hours a week. The study claims that this increase is primarily driven by a rise in wage rates.
a. Use the income and substitution effects to describe the labor supply for the average American. Which effect dominates?
b. The study also finds an increase in female labor force participation-more women are choosing to hold jobs rather than exclusively perform household tasks. For the average woman who has newly entered the labor force, which effect dominates?
c. Draw typical individual labor supply curves that illustrate your answers to part a and part b above.