00:01
So here we're told that suppose that consumer's labor supply is negatively slow.
00:05
So the first thing i want to do is draw it.
00:07
Labor supply is a story about labor versus wage.
00:12
So here we have a supply curve that looks something like this, which says that the person is going to work less as their wage goes up, which makes a certain amount of sense, right? so what does this mean, right? a, leisure is inferior.
00:29
Well, what does inferior mean? inferior means that as income increases, it would mean that leisure decreases, right? but that's not what's happening here.
00:46
Here we have as income increases because your wage is going up, right? leisure is increasing because you're working less, right? you are working less.
00:57
So a is wrong.
00:59
B, magnitude of the income effect is greater than substitution.
01:06
Income is greater than substitution effect.
01:12
Well, what's the income effect? the income effect is as the income goes up, leisure goes up, right? leisure is good.
01:24
So as you become richer because you have higher income, you buy more leisure, right? the substitution effect is talking about the price.
01:34
The substitution effect means that as the wage goes up, it means that work should go up.
01:44
The wage is going up, so working is more rewarded...