Suppose the preferences of the individual change in such a way that the individual requires now to be compensated to forgo one hour of leisure and be as satisfied as before..
im not sure what this means!! does it mean, the worker wants to give up one hr of leisure to gain one hr of consumption because he has a lot of leisure?? so will new indifference curve be flatter or steeper?
Thank you for using the Jiskha Homework Help Forum. Let's say you now have 10 leisure hours. Someone wants you to give up 1 of those hours, so you only have 9. It is not the worker who wants to give up that hour but if the company pays him for that time, he is willing. In other words, less leisure time means more money. Some people would prefer that while others would not.
thx!
would the indifference curve be steeper or flatter? and would the optimal choice be near the right?
I guess I don't understand what is being changed. Was it the case the person was indifferent between working and leisure, and with the change now expects to be paid for working? The initial case seems implausable. Or is it the case the person wants MORE compensation to give up an hour of leisure.
That said, put leisure on the y-axis, work on the x-axis. The indifference curve would then be flatter than before. He will, likely, take more leisure than before.
bump
If the preferences of the individual change in such a way that the individual requires to be compensated for giving up one hour of leisure and be as satisfied as before, it means that the individual now values leisure more than before and wants to be compensated for any loss of leisure time.
With this change in preferences, the indifference curve will be steeper than before. The steeper indifference curve represents the higher value the individual places on leisure. The optimal choice in terms of the trade-off between leisure and consumption will be closer to the leisure axis, indicating that the individual will choose to have more leisure time and less consumption.
Overall, the individual's preference for leisure has increased, leading to a higher value assigned to leisure and a shift in the optimal choice towards more leisure time.