3. Suppose that the production function of an economy is given by Y = √N. The (representative) firm hires workers (N) at a wage rate w. Assume that the firm maximizes profits by choosing how much to produce and how many workers (hours) to hire. (Remember that the profit function is Y - WN.) The representative consumer has preferences given by the utility function U(-) = log (c) + log (1), with a marginal rate of substitution given by c/l, where c is consumption and / is the leisure time. The endowment of time of an individual is 24, which has to be allocated between labor and leisure. (Recall that N + 1 = 24.) a. Derive an expression for the labor demand function.

3. Suppose that the production function of an economy is given by Y = √N. The (representative) firm hires workers (N) at a wage rate w. Assume that the firm maximizes profits by choosing how much to produce and how many workers (hours) to hire. (Remember that the profit function is Y - WN.) The representative consumer has preferences given by the utility function U(-) = log (c) + log (1), with a marginal rate of substitution given by c/l, where c is consumption and / is the leisure time. The endowment of time of an individual is 24, which has to be allocated between labor and leisure. (Recall that N + 1 = 24.) a. Derive an expression for the labor demand function.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(b) U(x, y) = min [ax, y]