1) Find and draw the labor supply function. 2) Suppose that the government introduces a cash grant for the labor (who is in the labor force) in the amount of R. Find and draw the labor supply function? Compare it to the labor supply function you have found in a).
Suppose that following represents the utility function of the individual
U(c,l)=log(c)+log(l)
c = consumption level of the individual and l = leisure, while the market wage is 10 and available time is 20.
1) Find and draw the labor supply function.
2) Suppose that the government introduces a cash grant for the labor (who is in the labor force) in the amount of R. Find and draw the labor supply function? Compare it to the labor supply function you have found in a).
3) Discuss the existence of reservation wage in the settings described in a and b? If your answer is : “there are no reservation wages under those settings”, please introduce a change in the policy described in b) to make sure that the reservation wage would exist.
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