Chapter 11 (LC/HW)

The _____ describes how people's choices change when they have more income.

Income effect

How does a fall in the price of machinery affect the demand for low-skilled workers and does the substitution effect or the scale effect dominate in this scenario?

The substitution effect dominates and leads to a decrease in the demand for low-skilled workers.

Which is NOT true about labor supply? A. Workers tend to work less when the wage is low. B. Workers tend to work fewer hours when wages are very high. C. A high wage provides a strong incentive to work, leading you to work longer hours. D. Workers tend to work extra hours in response to a small change in wages.

Workers tend to work extra hours in response to a small change in wages.

In the graph of the market for books below, what does the downward-sloping demand curve represent?

the decisions of bookstore customers

What does the upward-sloping supply curve represent in the graph of the price of books?

the decisions of bookstore owners

When voice recognition software becomes more widely used, what happens to the labor market for stenographers?

Wage will decrease, and fewer jobs will be available

As baby boomers age, more people seek in-home elder care for their aging parents. What happens to the labor market for home-health aids?

Wage will increase, and more jobs will be available.

A century ago, it was common for children to work and many people worked until they died. Over time as wages have risen and the length of the typical workweek has declined, people consume a lot more leisure today. What does this evidence suggest?

The supply curve is downward-sloping.

Regarding the substitution effect, a _____ wage increases the returns to working relative to leisure, leading you to _____.

higher; work more

With regard to labor supply, the substitution effect describes:

how people respond to a change in relative prices.

You should broadly think about the relevant _____ to figure out the right occupation for you.

cost and benefits

The income effect measures:

how people's choices change when they have more income.

New education funding designed to make college more affordable will shift the labor supply curve to the left because it:

increases the benefit of not working.

Just as labor demand is all about your marginal revenue product, your labor supply is all about the:

marginal benefit of leisure.

The evidence suggests that for most people, the individual supply curve is _____.

nearly vertical

What does the upward-sloping labor supply curve represent in the graph of the wage of a hairdresser?

the decisions of hairdressers

What does the number 1 on the vertical axis represent in the graph of the market for rabbits?

the equilibrium price of a rabbit

Businesses are buyers; they buy:

the time and effort of the employees they hire.

If the substitution effect dominates, the individual supply curve is _____.

upward-sloping