Over the last 10 years, wages have doubled in country A and country B. During the same time, hours of work increased in country A, while they decreased in country B. Which of the f... Over the last 10 years, wages have doubled in country A and country B. During the same time, hours of work increased in country A, while they decreased in country B. Which of the following are possible explanations for this pattern? Consider the following game played between two players, A and B, over three rounds. In each round, one player decides to continue or stop. The unique subgame perfect equilibrium is that all players choose to continue at any point. The market for fidget spinners is perfectly competitive, has an upward-sloping supply curve, and a downward-sloping demand curve. Suppose the market is initially in its long-run equilibrium, but then an Instagram post by a famous model leads to a massive increase in demand. Underground railway services are provided by public companies in most big cities. Which reasons can help explain this? Which of the following are suitable measures to reduce earnings inequality (before taxes) between workers over the course of the next year?
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The image contains a series of economic and game theory questions related to wage differences, economic equilibrium, market dynamics, and measures to reduce income inequality. It is structured as a quiz or exam format, indicating theoretical applications and implications in different scenarios.
Answer
Consumption/free time preferences differ; substitution effect larger than income effect in B; incomes lower in B.
Preferences over consumption and free time differ between the two countries. The substitution effect of the wage increase was larger than the income effect in country B. The two populations have the same preferences, but incomes in country B are much lower than in country A.
Answer for screen readers
Preferences over consumption and free time differ between the two countries. The substitution effect of the wage increase was larger than the income effect in country B. The two populations have the same preferences, but incomes in country B are much lower than in country A.
More Information
Economic theories such as the substitution and income effect provide insights into different labor supply responses from wage changes.
Tips
Understanding the substitution and income effects is crucial for analyzing labor supply decisions.
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