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Problem 5: Time Allocation without Income Effects Robinson has preferences described by the utility function u(c, h) = c = h, with > 1,
Problem 5: Time Allocation without Income Effects Robinson has preferences described by the utility function u(c, h) = c = h, with > 1, where c denotes consumption and h hours of work. Assume that the total number of available hours is equal to one so that 1+h = 1. The production function is y = Aha, with 0 < a < 1. (a) What is the optimal choice of hours worked, h*? 2 (b) What happens to h* if A rises? (c) What happens to h* if we increase the value of o?
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