For which of the following workers would the income effect be more likely to outweigh the substitution effect of an increase in wage?
A. Gardener
B. Teacher
C. Professional athlete
D. Plumber
Answer: C
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Suppose your tastes are defined by the utility function 
.
a. Suppose your income is $1,000, the price of 
is 1 and the price of 
style="vertical-align: -7px;" width="15px" height="20px" align="absmiddle" /> is 
. Set up your utility maximization problem.
b. Derive the quantity of 
you will consume.
c. What happens to your consumption of 
if 
increases?
d. Now suppose that your and my tastes are captured by the utility function 
, with the parameter 
different for you than it is for me. When 
increases, you consume more 
than before and I consume less. What range of 
is consistent with your behavior, and what range is consistent with mine? Use your answer to (b) to explain.
What will be an ideal response?
Many unions attempt to raise the hourly wages received by their members by restricting the supply of workers firms can hire from. Assuming the demand for workers who belong to these unions is inelastic, this would cause:
A) wages of individual union members to decrease and the total (combined) income of union members to increase. B) wages of individual union members and the total (combined) income of union members to decrease. C) wages of individual union members to increase and the total (combined) income of union members to decrease. D) wages of individual union members and the total (combined) income of union members to increase.
An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.
Answer the following statement true (T) or false (F)
A "payday loan" is a ________ amount of money borrowed for short period, by ________ income people who have a checking account, a job, and direct deposit of their paycheck
a. large; higher b. small; higher c. large; lower d. small; lower