Scribd Logo
Upload

Welcome to Scribd!

  • 50 views

    Figure 6-4 and 7-1: Income and Substitution Effect: Movies (M)

    Uploaded by

    Reckon Indepth
    The document contains figures and diagrams related to economics topics such as income and substitution effects, demand for inferior goods, labor-leisure tradeoffs, and deriving leisure demand and labor supply curves from budget constraints.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Figure 6-4 and 7-1: Income and Substitution Effect: Movies (M)

    Uploaded by

    Reckon Indepth
    50 views10 pages
    The document contains figures and diagrams related to economics topics such as income and substitution effects, demand for inferior goods, labor-leisure tradeoffs, and deriving leisure demand and labor supply curves from budget constraints.

    Original Description:

    .

    Original Title

    MIT14_01SCF11_graph07

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document contains figures and diagrams related to economics topics such as income and substitution effects, demand for inferior goods, labor-leisure tradeoffs, and deriving leisure demand and labor supply curves from budget constraints.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    50 views10 pages

    Figure 6-4 and 7-1: Income and Substitution Effect: Movies (M)

    Uploaded by

    Reckon Indepth
    The document contains figures and diagrams related to economics topics such as income and substitution effects, demand for inferior goods, labor-leisure tradeoffs, and deriving leisure demand and labor supply curves from budget constraints.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 10

    Pizza (P)

    Figure 6-4 and 7-1: Income and

    substitution effect

    B
    A

    3
    2

    BC2
    0

    4.89

    Income effect Substitution effect

    BC*
    10

    BC1
    12

    14

    Movies (M)

    Figure 7-2: Price change with an inferior good


    S

    3.3

    1.4

    BC2
    6

    8.3

    Substitution effect
    Inc. effect Total effect

    BC3

    BC1
    25
    P

    Figure 7-3: Labor leisure trade-off


    Goods
    (Price of goods = 1)

    24w

    Slope of budget constraint = -w

    BC
    24

    Leisure
    Work

    Goods

    Figure 7-4: Income and substitution


    effects for labor supply: income effect
    does not dominate
    C

    C3

    C2
    C1

    B
    A
    BC2

    BC*
    N2 N3 N1
    Income effect
    Substitution effect

    BC1
    Leisure
    Work

    Goods

    Figure 7-5: Income and substitution effects


    for labor supply: income effect dominates

    C3
    C2

    B
    A

    C1

    BC2
    BC*
    N2

    N1

    BC1
    N3

    Income effect
    Substitution effect

    Leisure
    Work

    Consumers Decision

    24W2

    12W2

    Goods
    24W1

    8W1

    12

    16

    BC2

    BC1
    Leisure

    Figure 7.6:
    Deriving
    leisure
    demand and
    labor supply

    Figure 7.6: Deriving leisure


    demand and labor supply
    Wage

    W2

    Demand for Leisure

    W1

    12

    16

    Leisure

    Supply of labor
    Wage

    W2

    W1

    12

    Labor

    MIT OpenCourseWare
    http://ocw.mit.edu

    14.01SC Principles of Microeconomics


    Fall 2011

    For information about citing these materials or our Terms of Use, visit: http://ocw.mit.edu/terms.

    You might also like