What is the optimal labor supply of the representative consumer? ○ N³* = 1 − (3) 4 1-(3/4) 4w4 ON * = 1 - (38 β = 1 − ( ) ○ N8* = 1 - 4w ○ N** = 1 - (40) 43 Consider the decisions of a representative consumer whose preferences are given by u(C, 1) = C+ Bl₁, in which C is the quantity of consumption and 1 is the quantity of leisure. The parameter Bis positive, and 0 < ß < 1 holds. The consumer faces two constraints. The time constraint is given by 1 + N³ = 1 with N³ as the time spent working (or the labor supply). Further, consumers take wages as given (outside of their control) and obtain wage income equal to wNs. The budget constraint is C w(1-1)+π-T, with TT as the real dividend income received from the representative firm and T as the real lump- sum taxes paid to the government. Assume for simplicity that T = 0. =
What is the optimal labor supply of the representative consumer? ○ N³* = 1 − (3) 4 1-(3/4) 4w4 ON * = 1 - (38 β = 1 − ( ) ○ N8* = 1 - 4w ○ N** = 1 - (40) 43 Consider the decisions of a representative consumer whose preferences are given by u(C, 1) = C+ Bl₁, in which C is the quantity of consumption and 1 is the quantity of leisure. The parameter Bis positive, and 0 < ß < 1 holds. The consumer faces two constraints. The time constraint is given by 1 + N³ = 1 with N³ as the time spent working (or the labor supply). Further, consumers take wages as given (outside of their control) and obtain wage income equal to wNs. The budget constraint is C w(1-1)+π-T, with TT as the real dividend income received from the representative firm and T as the real lump- sum taxes paid to the government. Assume for simplicity that T = 0. =
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.13P
Question

Transcribed Image Text:What is the optimal labor supply of the representative consumer?
○ N³* = 1 − (3) 4
1-(3/4)
4w4
ON * = 1 - (38
β
= 1 − ( )
○ N8* = 1 -
4w
○ N** = 1 - (40)
43

Transcribed Image Text:Consider the decisions of a representative consumer whose preferences are given by u(C, 1) =
C+ Bl₁, in which C is the quantity of consumption and 1 is the quantity of leisure. The parameter
Bis positive, and 0 < ß < 1 holds.
The consumer faces two constraints. The time constraint is given by 1 + N³ = 1 with N³ as the
time spent working (or the labor supply). Further, consumers take wages as given (outside of their
control) and obtain wage income equal to wNs. The budget constraint is C w(1-1)+π-T,
with TT as the real dividend income received from the representative firm and T as the real lump-
sum taxes paid to the government. Assume for simplicity that T = 0.
=
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