solutions

Problem 7 Calculate the hours of work (T-L) for the Income Leisure model under the following circumstances. Yn = 0, T = T, W = w and U = IL Why do we use parameters and not numbers? (Hint= easy to change numbers rather than calculating every time) Problem 8 a) Calculate the equilibrium level of wages under the following situation:a) Situation I Wages = 10,000 - L (Demand) Wages - 1,000 + L (Supply) Situation II Wages = 10,000 -L (Demand) Wages = 1,000 - L' (Supply) b) Explain some price change or wage change that you have observed with the model of supply and demand