Suppose the consumer's preference is given by c-1 1-o u(c, l) = + In l, o>...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose the consumer's preference is given by c¹-1 1-o u(c, l) = + In l, o> 0 (1) where c is the consumption and I is the leisure. The consumer's problem is to choose (c, !) to maximize (1) subject to the budget constraint (2) c = w(hl) where w is the real wage and h is the total number of time available. (a) Set up the constrained optimization problem. Write out the Lagrangian and first order conditions. (b) From your calculation in (a), derive an equation that pins down the relationship be- tween optimal choice of working hours n = h - 1 and real wage w. (c) Take derivative on both sides of the equation you get in (b) with respect to w, calculate on. Determine whether the slope of labor supply curve, i.e. is positive or negative. [Hint: your answer should depend on the parameter o.] On* dw Suppose the consumer's preference is given by c¹-1 1-o u(c, l) = + In l, o> 0 (1) where c is the consumption and I is the leisure. The consumer's problem is to choose (c, !) to maximize (1) subject to the budget constraint (2) c = w(hl) where w is the real wage and h is the total number of time available. (a) Set up the constrained optimization problem. Write out the Lagrangian and first order conditions. (b) From your calculation in (a), derive an equation that pins down the relationship be- tween optimal choice of working hours n = h - 1 and real wage w. (c) Take derivative on both sides of the equation you get in (b) with respect to w, calculate on. Determine whether the slope of labor supply curve, i.e. is positive or negative. [Hint: your answer should depend on the parameter o.] On* dw
Expert Answer:
Answer rating: 100% (QA)
a The constrained optimization problem can be set up as follows Maximize uc I c11 I Subject to the b... View the full answer
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
Students also viewed these economics questions
-
Suppose you own a business that does well during economic expansions but not so well during recessions which happen with probability . Let xE denote your consumption level during expansions and let...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Suppose the current tax system is such that the government takes some fixed percentage t of any labor income that you make. A. Some in Congress have proposed the following alternative type of tax...
-
I am learning intermediate accounting and how to account for leases. I have a question about the calculation of present value for the right to use of the lease. my example specifically has a...
-
Let P(x1, y1) be a point on the ellipse x2/a2 + y2/b2 = 1 with foci F1 and F2 and let α and β be the angles between the lines PF1, PF2 and the ellipse as in the figure. Prove that α...
-
Identify the more acidic compound in each of the following pairs: (a) CF3CH2CO2H or CF3CH2CH2CO2H (b) CH3CH2CH2CO2H or CH3CCCO2H
-
The balance sheet data for Quick Care, Inc. September 30, 2010, follow: Requirement 1. The following are three independent assumptions about the business during September. For each assumption,...
-
Hiatt Toothpaste Company initiates a defined benefit pension plan for its 50 employees on January 1, 2017. The insurance company which administers the pension plan provided the following selected...
-
Consider the Solow growth model developed in class. The production function is Y = K(AL)-, where 0 < a < 1. Population grows at the exogenous rate n, Lt+1 = (1 + n)Lt. The capital stock accumulates...
-
Consider the stirred-tank reactor shown in Fig. P5-5. The reaction occurring is A ? B and it proceeds at a rate r = kCo where r = (moles A reacting)/(volume)(time) k = reaction rate constant Co (t) =...
-
BHP's Petroleum business has been merged with Woodside to create a global top 10 independent energy company on 1 June 2022. Investment analysts have raised significant concerns regarding Woodside's...
-
Electric potential is measured at points A = ( - 2 , - 3 ) cm and B = ( 5 , - 4 ) cm . The measurements are VA = 9 V and VB = 3 6 V , respectively. The electric field points exclusively along the x -...
-
For a company named BRAND Burger targeting people from different nationalities by serving them burgers with taste and recipies from their country, going to be opened in BC Canada Make SWOT analysis....
-
The five-charge model below consists of the interaction between a molecule of oil, represented as two polarization charges, to the left, and a molecule of water, to the right. O H* H* 50 pm 100 pm 50...
-
Can algorithms produce better hiring results than people can? Justify your position on this question.
-
Most people think of sales and immediately think of a used car salesperson. However, sales ability and the ability to influence others is in almost every career field. Consider your own personal...
-
Discuss both direct and indirect labor costs. Provide a minimum of three examples for each cost and explain how companies can estimate them using the Work Breakdown Structure (WBS). Justify your...
-
In Problems, solve each system of equations. x + 2y + 3z = 5 y + 11z = 21 5y + 9z = 13
-
Subsistence Levels of Consumption: Suppose you are interested in modeling a policy issue involving poor households in an under-developed country. A: The households we are trying to model are...
-
In representative democracies where legislators represent geographic districts in legislative bodies (such as the U.S. House of Representatives), we often hear of pork barrel spending. Typically,...
-
We investigated different ways that you can price the use of amusement park rides in a place like Disneyland. We now return to this example. Assume throughout that consumers are never at a corner...
-
Solve Chapter Problem 13.21, assuming the force is narrowband with a power spectral density given by \(S_{F}(\omega)=\frac{3 \times 10^{-3}}{2+5 \omega^{2}}\). Data From Chapter Problem 13.21: A SDOF...
-
Solve Chapter Problem 13.21, assuming the power spectral density is band limited with \(\omega_{1}=50 \mathrm{rad} / \mathrm{s}\) and \(\omega_{2}=200 \mathrm{rad} / \mathrm{s}\). Data From Chapter...
-
Fine Leather Ltd has provided the following production and sales information for each pair of its dress shoes. The fixed costs for the period are \($1\) 125 000. Required (a) Calculate the...
Study smarter with the SolutionInn App