lower indifference curve (Ul). Point A has 30 hours of leisure and thus 50 hours per week of work, with income

of $600 per week (that is, 50 hours of work at $12 per hour). Petunia then gets a raise to $20 per hour, which

shifts her budget constraint to the right. Her new utility-maximizing choice occurs where the new budget

constraint is tangent to the higher indifference curve Uh. At B, Petunia has 40 hours of leisure per week and

works 40 hours, with income of $800 per week (that is, 40 hours of work at $20 per hour).

FIGURE B5 Effects of a Change in Petunia’s Wage Petunia starts at choice A, the tangency between her original

budget constraint and the lower indifference curve Ul. The wage increase shifts her budget constraint to the right, so

that she can now choose B on indifference curve Uh. The substitution effect is the movement from A to C. In this

case, the substitution effect would lead Petunia to choose less leisure, which is relatively more expensive, and more
{"file_type": ".pdf", "uploaded_via": "batch_uploader", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "total_pages": 597, "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "batch_upload": true, "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "creator": "PDFMiner", "producer": "Prince 14.2 (www.princexml.com)", "moddate": "2022-12-07T14:23:05-06:00", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "title": "Principles of Microeconomics 3e", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf"}