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Individual Labour Supply 1: Labour Force Measurement and Income-Leisure Model

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Questions and Answers

What is a key challenge in estimating the effect of a program on individual behaviour?

Limited data availability
Measuring labour market attachment
Difficulty in separating income and substitution effects (correct)
Obtaining accurate wage rate information

What is the primary goal of childcare subsidies in the labour market?

To reduce unemployment rates
To increase the wage rate
To increase labour market participation of women (correct)
To decrease the labour force participation rate

According to the labour supply model, what is the effect of an increase in the wage rate on labour supply?

It has an ambiguous effect on labour supply (correct)
It has no effect on labour supply
It always leads to an increase in labour supply
It always leads to a decrease in labour supply

What is the main difference between demogrants and social assistance programs?

Demogrants are not means-tested, while social assistance programs are (D) Signup and view all the answers

What is the primary effect of unemployment insurance on labour supply?

It decreases labour supply (B) Signup and view all the answers

What is the labour force participation decision?

The decision to work or not (D) Signup and view all the answers

What is the optimal amount of income and leisure in a utility-maximizing equilibrium?

The highest indifference curve given the income constraint (B) Signup and view all the answers

What is the effect of an increase in non-labour income on the labour supply decision?

Leisure becomes a normal good, leading to less work hours (D) Signup and view all the answers

What determines the willingness to exchange leisure for consumption or income?

The MRS (A) Signup and view all the answers

What happens to hours of work if the income effect of a wage increase dominates?

Hours of work decrease (B) Signup and view all the answers

What is the term used to describe the graphical representation of the trade-off between leisure and income?

Budget constraint (D) Signup and view all the answers

What is the primary assumption made in the Basic Income-Leisure Model of Labour Supply?

Consumers have well-defined preferences over consumption and leisure (C) Signup and view all the answers

What is the main objective of designing welfare programs that minimize adverse work incentives?

To direct benefits to those who need it most (D) Signup and view all the answers

Why are workers typically paid an overtime premium rather than a higher wage to induce them to work overtime?

To recognize the disutility of working overtime (B) Signup and view all the answers

What is the labour force participation rate (LFPR) calculated as?

LFPR = LF / POP (D) Signup and view all the answers

What is a requirement for an individual to be considered unemployed?

The person must be actively looking for a job in the previous four weeks (A) Signup and view all the answers

What is the main argument against unemployment insurance?

It unambiguously reduces incentives to work (D) Signup and view all the answers

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