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2) Assume Greg derives utility from consuming a composite good (C) and leisure (R) according to the utility function: U = C\/2R!/2, where C is consumption (with a price p) and R is leisure. Greg can also work L hours per day and he earns a wage of w per hour of work per day where there are 24 hours in each day. He has non-wage income is M. a).What is his budget constraint (as an equation and draw the graph). Explain how economists determine/conceptualize the price of leisure (R) and explain his initial endowment. b). Set up the Lagrangian and calculate his demand functions for C and R.

2) Assume Greg derives utility from consuming a composite good (C) and leisure (R) according to the utility function: U = C\/2R!/2, where C is consumption (with a price p) and R is leisure. Greg can also work L hours per day and he earns a wage of w per hour of work per day where there are 24 hours in each day. He has non-wage income is M. a).What is his budget constraint (as an equation and draw the graph). Explain how economists determine/conceptualize the price of leisure (R) and explain his initial endowment. b). Set up the Lagrangian and calculate his demand functions for C and R.

Algebra and Trigonometry (6th Edition)
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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2) Assume Greg derives utility from consuming a composite good (C) and leisure (R) according to the utility function: U = C/2R!/2, where C is consumption (with a price = p) and R is leisure. Greg can also work L hours per day and he earns a wage of w per hour of work per day where there are 24 hours in each day. He has non-wage income is M. a).What is his budget constraint (as an equation and draw the graph). Explain how economists determine/conceptualize the price of leisure (R) and explain his initial endowment. b). Set up the Lagrangian and calculate his demand functions for C and R. c).What is the equation that describes his labor supply? d). Assume P=1, M = 100/day, and the wage rate, w, is $25 per hour. How many hours will he work per day? At what wage will he decide to no longer work any hours (keep M = 100)?
Transcribed Image Text:2) Assume Greg derives utility from consuming a composite good (C) and leisure (R) according to the utility function: U = C/2R!/2, where C is consumption (with a price = p) and R is leisure. Greg can also work L hours per day and he earns a wage of w per hour of work per day where there are 24 hours in each day. He has non-wage income is M. a).What is his budget constraint (as an equation and draw the graph). Explain how economists determine/conceptualize the price of leisure (R) and explain his initial endowment. b). Set up the Lagrangian and calculate his demand functions for C and R. c).What is the equation that describes his labor supply? d). Assume P=1, M = 100/day, and the wage rate, w, is $25 per hour. How many hours will he work per day? At what wage will he decide to no longer work any hours (keep M = 100)?
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