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Consider a closed economy without government; resource constraint is Y = C Production is (FIRST IMAGE SHOWN) K = 400 Consumer preferences is U (C,I) = ln (C) + ln (I) a) Suppose that z = 10. Show that if the consumerís time endowment is given by h = 6000 hours, the equilibrium quantity of leisure is 2 3 h = 4000 hours. What is the real wage? (b) Suppose that z = 20. Show that the equilibrium quantity of leisure is still 2 3 h = 4000 hours. What is the real wage? (c) Comparing parts (a) and (b), what can you infer about the income and substitution e§ects of a productivity increase?

Consider a closed economy without government; resource constraint is Y = C Production is (FIRST IMAGE SHOWN) K = 400 Consumer preferences is U (C,I) = ln (C) + ln (I) a) Suppose that z = 10. Show that if the consumerís time endowment is given by h = 6000 hours, the equilibrium quantity of leisure is 2 3 h = 4000 hours. What is the real wage? (b) Suppose that z = 20. Show that the equilibrium quantity of leisure is still 2 3 h = 4000 hours. What is the real wage? (c) Comparing parts (a) and (b), what can you infer about the income and substitution e§ects of a productivity increase?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 1.2CE: Plot the logarithm of arrivals for each transportation mode against time, all on the same graph....
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Consider a closed economy without government; resource constraint is Y = C

Production is (FIRST IMAGE SHOWN)

K = 400

Consumer preferences is U (C,I) = ln (C) + ln (I)

a) Suppose that z = 10. Show that if the consumerís time endowment is given by h = 6000 hours, the equilibrium quantity of leisure is 2 3 h = 4000 hours. What is the real wage?

(b) Suppose that z = 20. Show that the equilibrium quantity of leisure is still 2 3 h = 4000 hours. What is the real wage?

(c) Comparing parts (a) and (b), what can you infer about the income and substitution e§ects of a productivity increase?

Y = 2√K√N = 2K¹/2 ¹/2
Transcribed Image Text:Y = 2√K√N = 2K¹/2 ¹/2
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