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Instructions: Please use this file to answer your questions and type all your answers

Economics

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Instructions: Please use this file to answer your questions and type all your answers. You may hand draw and paste the image within the question they belong. Submit all the questions as a single MS Word or PDF document using the submission link on Groups page. Question 1: [25 marks] Suppose an individual has a maximum of 24 hours a day (7) (this is slightly different from the 16 hours we used in lecture discussion) that can be allocated between work (it) and leisure (e) . Assume zero non-labour income. Use the graphs to answer all parts of the question and explain each part step by step. 
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5 10 15 20 25 30 h a) [8 marks] Use the first graph to explain how to determine the utility-maximizing outcome for the individual with hourly wage (W) at $2.5, $5, $7.5, and $10. b) [9 marks] Assume leisure is a normal good. Explain how to determine the relative magnitude of the substitution and income effects as hourly wage increases from (i) $2.5 to $5; (ii) $5 to $7.5; and (iii) $7.5 to $10. 
c) [8 marks] Use your results from part (a) to help you explain how to plot the labour supply curve in the second graph. What do you observe about the labour supply curve? What is the relationship between your observation and your answers in part (b)?