Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 21 - Part VII - The Theory of Consumer Choice - Problems and Applications - Page 459: 9

Answer

Please see the graph.

Work Step by Step

The three budget constraint curves ($BC_{1}$, $BC_{2}$, and $BC_{3}$) and the indifference curves are for when Sarah earns 6 dollars per hour, 8 dollars per hour, and 10 dollars per hour, respectively. When paid 6 dollars an hour, Sarah will work $L_{6}$ hours. When paid 8 dollars an hour, Sarah will work $L_{8}$ hours. When paid 10 dollars an hour, Sarah will work $L_{10}$ hours. Since the labor supply curve is upward sloping when the wage is between 6 and 8 dollars per hour, the number of hours Sarah works decreases when Sarah's wage increases from 6 dollars per hour to 8 dollars per hour. However, since the labor supply curve is downward sloping when the the wage is between 8 and 10 dollars per hour, the number of hours Sarah works increases when Sarah's wage increases from 8 dollars per hour to 10 dollars per hour.
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