ECON 4531, Labor Economics

Labor Economics, Borjas, 8th edition

Problem 1 Let Charlie's utility function be U(C,L) : 02 + L2. Suppose he has T hours to split between work and leisure and he has no nonlabor income. (a) What combinations of C and L give Charlie a utility of 4? Is there any geometric interpretation of the equation you derive? What does this mean for optimal solutions? (b) Derive Charlie's optimal choice of consumption and leisure as a function of the wage and T. (c) What is Charlie's reservation wage? (d) If Roberts utility function is U 0,1; : (32 + 9L2, is his reservation wa e hi her or s s lower than Charlie's