16.10 Family labor supply A family with two adult members seeks to maximize a utility function of the form Uðc, h1, h2Þ, where c is family consumption and h1 and h2 are hours of leisure of each family member. Choices are constrained by c ¼ w1ð24 % h1Þ þ w2ð24 % h2Þ þ n, where w1 and w2 are the wages of each family member and n is nonlabor income.

a. Without attempting a mathematical presentation, use the notions of substitution and income effects to discuss the likely signs of the cross-substitution effects @h1 / @w2 and @h2 / @w1.

b. Suppose that one family member (say, individual 1) can work in the home, thereby converting leisure hours into consumption according to the function c1 ¼ fðh1Þ, where f0 > 0 and f00 < 0. How might this additional option affect the optimal division of work among family members?