By Espinosa J.V.B., et al.
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Extra resources for Problemas de calculo diferencial e integral (2005)
Rather, they have utility functions that cause them to keep their hours constant as wages rise. For any given increase in the wage rate, the substitution effect and the income effect cancel out. 7) if I is close to zero, which means that most people have very little access to income from sources other than their work. This may also explain why a married woman, who would treat her husband’s income as her I if she is making an independent decision about labor-force participation, may have a greater response to wage change than her husband.
Alternatively, a person close to retirement will have accumulated a “nest-egg” which gives him access to 32 THE TRADITIONAL MODEL OF THE LABOR MARKET Figure 2–4 Intertemporal substitution of hours of work nonwage income, I, and this increases the marginal utility of leisure. Either of these conditions would allow for a tangency between the indifference curve and the budget constraint that is close to vertical. Nevertheless, it is difficult to explain abrupt changes in hours from positive to zero or vice versa without having large differences in wage rates.
Thus H0 and H1 could be the hours supplied by a married couple who face different wages, (W/P)0 and (W/P)1. Although the interest rate would no longer be relevant because this is not an intertemporal decision, Fig. 2–4 could be THE SUPPLY OF HOURS BY AN INDIVIDUAL 33 applied to this choice and corner solutions would imply that one of the two family members is a homemaker. 8 Overtime Hours Firms do not pay the same wage for every hour of work that they obtain from their workers. 2 Can workers be persuaded to work extra hours when they are offered such a premium?
Problemas de calculo diferencial e integral (2005) by Espinosa J.V.B., et al.