Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please refer to image In any given week, Anne receives satisfaction only from the consumption of goods and from the consumption of leisure L, which

please refer to image

image text in transcribed
In any given week, Anne receives satisfaction only from the consumption of goods and from the consumption of leisure L, which is measured in hours. Obviously, Anne consumes many different types of goods, but for simplicity we aggregate the dollar value of all the goods that she consumes during the week and call it C. Assume that if Anne chooses to work the hourly wage rate is w =2 and she has to sleep 8 hours per day. Potentially, if she wants, she can work up to 5 days a week. Call L Anne's weekly leisure time, where L is all the hours during the 5-day workweek during which Anne is neither working nor sleeping. Anne's utility is given by u(C, L) = Co LI-a where a = 0.4. Wherever rounding is needed, please round to 3 decimal points. a) (1 point) What is Anne's utility maximising choice of C? b) (2 points) By how many hours does her optimal choice of L increase if the government gives her a weekly unconditional subsidy of $20? c) (2 points) Suppose that a = 0.5 and that instead of giving Anne an unconditional weekly subsidy, the government gives Anne a weekly subsidy of R only if Anne does not earn any income from work at all. If she works a positive amount, no matter how small, she does not receive any subsidy. If Anne is exactly indifferent between not working and working a positive amount, it must be that R is equal to._(fill in the blank)

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

Economics

Authors: David Colander

7th Edition

0073402869, 9780073402864

More Books

Students also viewed these Economics questions

Question

please help me use excel

Answered: 1 week ago

Question

Behaviour: What am I doing?

Answered: 1 week ago