Re: ISI INTERVIEW PREP

Posted by deepak on Jun 30, 2012; 2:03pm
URL: http://discussion-forum.276.s1.nabble.com/ISI-INTERVIEW-PREP-tp7578819p7578869.html

Ram, for the SE/IE consideration, I went by this intuition - the labor supply curve is upward sloping because the substitution effect of increased wages outweighs the income effect which tends to dissuade people who earn more from working. So if the substitution effect is exactly offset by the income effect of having more money, the supply curve would be vertical, which is what we have in our case.