Question: Suppose there is a kid whose name is Kevin. He has leisure endowment (let's say it is L) and daily allowance (C). Assuming it's a
Suppose there is a kid whose name is Kevin. He has leisure endowment (let's say it is L) and daily allowance (C). Assuming it's a perfectly inelastic situation (vertical) for his labor supply curve. Kevin originally had a wage rate of $20, now it became $15. Answer questions below:
a) Draw a diagram that shows Kevin's old and new consumption points (A & B).
(b) Clearly describe a hypothetical budget line for a Slutsky decomposition,
and point out her hypothetical consumption point C.
(c) What are the signs of income and substitution effects on leisure consumption?
(d) Is leisure a normal or inferior good? please give an explanation
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