Question

Consider the choice of time allocation between leisure and work of Mister Smith,
assuming that he uses the entire income earned from work for consumption. In case
free time is an inferior good (its consumption decreases as income gets higher), what
would be the impact of an increase in wage on Mister Smith's working hours? If free
time is a normal good (i.e. its consumption increases as income increases), which
condition should hold to observe an increase in working hours of Mister Smith after
an increase in wage?​

Answer 1

Explanation:

When the wage rises the opportunity cost of leisure also goes up. ... Note that if leisure is an inferior good, the labour supply curve could not be backward bending. If leisure is inferior the income and substitution effects reinforce one another (both lead to an increase in hours worked for a wage increase).

Answer 2

Answer:

VERY VERY SIMPLE QUESTION