BUS 372

Week 4

DQ 1

Strategy Analysis

With a wage rate without overtime, an increase may not increase the working population of the firm as income effect of the increase will mean demand for leisure being high holding expenditure on other costs constant. This will reduce the working population and also reduced output and profit. On the other-hand, with overtime, workers who work only 8 hours will remain in the same wage level but earn more when additional time is spent on work. This will mean extra man hours into production thus increasing output and profit.

Income/Wage

BC1

From the diagram above, BC1 represents the original budget constraint and BC2 be the budget constraint under with overtime rate which the manager is initiating. The aim here is to increase the working population...