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What is the income effect of this wage change on labour supply? Consider the following one-period model. Consumer Utility function over consumption (C) and leisure

What is the income effect of this wage change on labour supply?

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Consider the following one-period model. Consumer Utility function over consumption (C) and leisure (L) U(C,L) = C3L Total hours: H = 40 Labour hours: NS = H - L Non-labour income: TT Lump-sum tax: T Hourly wage: w Firm Production function: Y = ZF(Nd) = ZNd Total factor productivity: z = 5 Government Government spending (exogenous): G = 30 Suppose that the total factor productivity, z, decreases to 3. What is the income effect of this wage change on labour supply(NS)? O A. -4.95 O B. +4.95 O C. +6.95 O D. -6.95 O E. None of the above

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