samantha has an annual non labour income of usd5000 suppose she has th
Samantha has an annual non-labour income of $5000. Suppose she has the total available time of 4160 hours per year. Samantha’s wage rate is $15 per hour, and she chooses to work 2000 hours in a year. Suppose when Samantha’s wage rate increases from $15 to $18 per hour, she will work 2040 hours. At $18 per hour, if she works 2200 hours per year, she would be indifferent to her original work decision before the wage increase.
a- Draw a diagram to show all the given information related to Samantha’s work circumstances. Calculate all the relevant income levels and label them in the graph.
b- Calculate Samantha’s income effect, substitution effect and total effect related to the wage increase. Show them in the diagram.
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