Find the wage rate in the competitive equilibrium. 1-2t w* = Z 1-t W* 3-2t = 2 1-t W* = W* 1+t = Consider the decisions of a representative consumer whose preferences are given by: u(C,1) = In C+ Inl where C is the quantity of consumption and 1 is the quantity of leisure. 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, consumer take wages as given and obtain after-tax labor income that is equal to w(1t)Ns where t is the income tax rate (0 < t < 1). Thus the consumer's budget constraint is given by C = w(1 − t)(1 − 1) + π where is the real dividend income received from the representative firm (i.e. firm profits).
Find the wage rate in the competitive equilibrium. 1-2t w* = Z 1-t W* 3-2t = 2 1-t W* = W* 1+t = Consider the decisions of a representative consumer whose preferences are given by: u(C,1) = In C+ Inl where C is the quantity of consumption and 1 is the quantity of leisure. 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, consumer take wages as given and obtain after-tax labor income that is equal to w(1t)Ns where t is the income tax rate (0 < t < 1). Thus the consumer's budget constraint is given by C = w(1 − t)(1 − 1) + π where is the real dividend income received from the representative firm (i.e. firm profits).
Chapter17: Capital And Time
Section: Chapter Questions
Problem 17.2P
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Transcribed Image Text:Find the wage rate in the competitive equilibrium.
1-2t
w* =
Z
1-t
W*
3-2t
=
2
1-t
W*
=
W*
1+t
=
Transcribed Image Text:Consider the decisions of a representative consumer whose preferences are given by:
u(C,1) = In C+ Inl
where C is the quantity of consumption and 1 is the quantity of leisure.
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, consumer take wages as given and obtain after-tax labor income that is equal to
w(1t)Ns where t is the income tax rate (0 < t < 1). Thus the consumer's budget constraint is
given by
C = w(1 − t)(1 − 1) + π
where is the real dividend income received from the representative firm (i.e. firm profits).
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