Summary 721
14.A study by economists at the Federal Reserve Bank of Boston
found that between 1965 and 2003 the average American’s
leisure time increased by between 4 and 8 hours a week. The
study claims that this increase is primarily driven by a rise in
wage rates.
a.Use the income and substitution effects to describe the
labor supply for the average American. Which effect
dominates?
b.The study also finds an increase in female labor force
participation—more women are choosing to hold jobs
rather than exclusively perform household tasks. For the
average woman who has newly entered the labor force,
which effect dominates?
c.Draw typical individual labor supply curves that illustrate
your answers to part a and part b above.Section 13 Summary