Question 5 (20 points, if selected): True/False/Uncertain. "Leisure may be an inferior good for an individual who exhibits a perfectly inelastic labor supply curve". Please explain graphically and in words in the context of our in-class discussion.
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An inferior good is a good whose demand decreases when income increases. A perfectly inelastic labor supply curve means that the individual works the same number of hours regardless of wage changes. Show more…
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Consider Jillian, whose backward-bending labor supply curve is shown in the figure below. Above $\$ 50$ per hour, increases in wages cause Jillian to work less and enjoy more leisure. That implies that leisure is a normal good. True or false: It must then be the case that below \$50 per hour; leisure is an inferior good. Explain your answer.
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