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4. Gob has a utility function over consumption (C) and leisure (L). U=C(L-8). His budget constrain is given by 200(50-L)+1600-C=0. Write out the optimality condition for utility maximization (aka first order condition).

4. Gob has a utility function over consumption (C) and leisure (L). U=C(L-8). His budget constrain is given by 200(50-L)+1600-C=0. Write out the optimality condition for utility maximization (aka first order condition).

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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4. Gob has a utility function over consumption (C) and leisure (L). U=C(L-8). His budget constrain is given by 200(50-L)+1600-C=0. Write out the optimality condition for utility maximization (aka first order condition). а. b. Find his optimal amount of leisure, consumption, and weeks worked given this budget constraint. Hint: T=50. c. Suppose Gob’s weakly wage changed to $400 and Gob works 19 weeks and that he worked 18 weeks at a wage of $200. Does the income or substitution effect dominate for Gob? Why? d. Assuming he worked 18 weeks with a wage of $200/week and 19 weeks with a wage $400/week. What is his labor supply elastic?
Transcribed Image Text:4. Gob has a utility function over consumption (C) and leisure (L). U=C(L-8). His budget constrain is given by 200(50-L)+1600-C=0. Write out the optimality condition for utility maximization (aka first order condition). а. b. Find his optimal amount of leisure, consumption, and weeks worked given this budget constraint. Hint: T=50. c. Suppose Gob’s weakly wage changed to $400 and Gob works 19 weeks and that he worked 18 weeks at a wage of $200. Does the income or substitution effect dominate for Gob? Why? d. Assuming he worked 18 weeks with a wage of $200/week and 19 weeks with a wage $400/week. What is his labor supply elastic?
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