1. Matt is deciding between buying stuff (c) with price p = 1 and leisure (L) with wage w. His utility function is U(L, c) = min{2c, 3L}. (11 points) (a) Find the demand functions for leisure (L ) and stuff (c ), then find the labor supply function l . Does Matt work more when the wage rate rises?

L = c = l =

(b) Your grandma says if the wage rate goes up, Matt will supply more labor. Explain to her, in general, why that is not necessarily true and why this distinction is important in studies of developing countries.