The figure given below shows the income-leisure trade off of an individual. Figure 15.6 AB and AC: Income constraints of the individual
I 1 ,I 2 ,and I 3 curves show the income leisure choices of the individual.
-Which of the following factors is likely to be responsible for the inward rotation of the income constraint from AB to AC in Figure 15.6?

Question

The figure given below shows the income-leisure trade off of an individual. Figure 15.6  AB and AC: Income constraints of the individual
I 1 ,I 2 ,and I 3 curves show the income leisure choices of the individual.
-Which of the following factors is likely to be responsible for the inward rotation of the income constraint from AB to AC in Figure 15.6?

Quizplus · Accepted Answer

An inward rotation of the income constraint indicates a decrease in the individual's disposable income. This could be caused by a decrease in the net income resulting from an increase in the income tax rate. Therefore, option C is the correct choice. A increase in income or an increase in demand for labor would shift the income constraint outwards. A decrease in the opportunity cost of labor or a decrease in the supply of labor would not necessarily affect the position of the income constraint.

The Figure Given Below Shows the Income-Leisure Trade Off of an Individual