EC107

Economics 1

Term 1

In-Class Questions

Week 4 Support and Feedback Class

Unit 3

Choice, Work and Scarcity

In-Q3.1:

(i) What property of preferences implies that indifference curves will be

downward-sloping?
(ii) What is meant by the marginal rate of substitution? Why might it be
diminishing?
(iii) What does the farmer’s feasible frontier show? How is it related to the
farmer’s production function?
(iv) What is meant by the marginal rate of transformation? Why might it be
increasing?

============

In-Q3.2:

(i) In a diagram, show the optimising choice of labour supply of an individual

worker. Explain what the indifference curves and the budget line represent.
(ii) Developing your diagram further, show how to represent an increase in non-
labour income, explaining what is meant by this term and providing examples.
How might an increase in non-labour income impact on the worker’s
optimising choice of labour supply?
(iii) Now develop the original diagram of the sort you produced for part (i) above
in order to represent the effect on labour supply of an increase in the hourly
wage rate. Discuss your conclusions from this analysis.
(iv) How might your analysis shed light on changes observed in hours worked
over time in a country like the UK?

============
Following your Class meeting of Week 4, you should ensure that you are able
independently to be able to produce clear and comprehensive answers to these
questions. To support you further in this, you should use all the resources available to
you on the module, including:

Lecture Videos and Slides; the online textbook CORE: The Economy; the peer-support
Forum for Unit 3; the Feedback on In-Class Questions for Unit 3; the FAQs resource. All
of these resources are clearly linked on the module Moodle page.

Professor Robin Naylor