Assume Bob’s initial equilibrium position is at point A. Next, assume that Bob’s budget line rotates upwards Income 480 I2 C B 240 A Leisure Hour 16 18 24 1. What is Bob's initial and new wage rates?...

Assume Bob’s initial equilibrium position is at point A. Next, assume that Bob’s budget line rotates upwards

Extracted text: Income 480 I2 C B 240 A Leisure Hour 16 18 24


Extracted text: 1. What is Bob's initial and new wage rates? (Show the calculation). 2. Based on the above diagram, what is the i. income effect, ii. substitution effect, net effect that is caused by the change in wage rate? State the movement from one point to another for each of the effects. 3. What is your conclusion about the relative strength of the income effect and substitution iii. effect?