a. Why are indifference curves convex to the origin? Explain what Marginal Rate of Substitution (MRS) means? When would indifference curves be linear, vertical or horizontal?
b. Explain the concepts of income effect and substitution effect? When would the individual labour supply curve bend backwards (explain using diagram)? What would be the shape of the labour supply curve if the income effect was always equal to the substitution effect (Explain using diagram)