Macro Chapter 4 Flashcards

Downward

Higher levels of welfare

Labour and Leisure

The negative of the real wage (-w), which represents the opportunity cost of leisure in terms of consumption

To reach the highest possible indifference curve within their budget. Indifference curve being tangent to the budget constraint.

The real wage (w)

Shifts the budget constraint outward, with a increase in leisure and consumption and a decrease in labour supply.

When leisure becomes more expensive relative to consumption, encouraging the consumer to substitute away from leisure and towards consumption

When the consumer is effectively wealthier, leading to an increase in the demand for both normal goods, consumption and leisure (and thus work less)

Increasing all inputs by a certain proportion increases output by the same proportion