1. Factor Pricing: Factor Supply  The slopes of the budget lines, a, b, and c show the wage rates (hourly rate)  The slope of c = Max. daily Income 24 hours leisure hours 24 Income a b c

2. Factor Pricing: Factor Supply  Which budget line shows the highest hourly wage rate? cc a b c

3. Factor Pricing: Factor Supply  The indifference map of income and leisure.  The slope of the indifference curve shows the marginal rate of substitution between income and leisure leisure hours 24 Income

4. Factor Pricing: Factor Supply  The indifference map  Which indifference curve shows the highest level of preference? cc leisure hours 24 Income a b c

5. The derivation of factor supply hbhb haha D Working hours baba

6. The Supply Curve of a Factor input  Why is the supply curve upward sloping?  1. Higher resource prices will draw resources from lower-valued uses.  2. The resource owners are able to supply more of the resource at a higher price. Wage rate Working hours

7. The Income and Substitution Effects  Which arrow represents IE?  The yellow arrow  Which arrow represents SE?  The blue arrow  Income and Substitution D Working hours

8. The derivation of factor supply  The yellow arrow represents IE.  The blue arrow represents SE.  Which effect is larger?  What is the shape of the factor supply curve?  Income and Substitution D Working hours

9. The derivation of factor supply  Upward sloping ww  Supply curve for factor input D Working hours Wage rate L

10. The derivation of factor supply  Which arrow represents IE?  The yellow arrow  Which arrow represents SE?  The blue arrow  Income and Substitution D Working hours Working hour

11. The derivation of factor supply  Which effect is larger?  The income effect  What is the shape of the supply curve?  Income and Substitution D Working hours Working hour

12. The derivation of factor supply  What is the shape of the factor supply curve?  downward sloping ww  Supply curve for factor input D Working hours Wage rate L Backward bending