Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume an individual has a utility function of this form U(C, L) = 16 + 8(C x L) This utility function implies that the individual's

Assume an individual has a utility function of this form

U(C, L) = 16 + 8(CxL)

This utility function implies that the individual's marginal utility of leisure is 8C and her marginal utility of consumption is 8L. The individual has an endowment of V=$320 in non-labour income and T = 16 hours to either work (h) or use for leisure (L). Assume that the price of each unit of consumption good p=$1 and the wage rate for each hour of work w=$24.

Question:

Calculate the minimum dollar amount required to convince this individual to give up an additional leisure hour in return for additional consumption good when she is already working 5 hours. Determine the change in consumption when the person now works 6 hours instead of 5 hours.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jan Williams, Susan Haka

17th Edition

126000645X, 9781260006452

More Books

Students also viewed these Economics questions

Question

What are the factors affecting organisation structure?

Answered: 1 week ago

Question

What are the features of Management?

Answered: 1 week ago

Question

Briefly explain the advantages of 'Management by Objectives'

Answered: 1 week ago

Question

3. Im trying to point out what we need to do to make this happen

Answered: 1 week ago

Question

1. I try to create an image of the message

Answered: 1 week ago