Consider the standard labor leisure choice model. Consumer gets utility from consumption (C) and leisure (13. She has H total hours. She works NS hours and receives the hourly wage, w. She has some non-labor income and pays lump-sum tax T. Further suppose -1)-0. The shape of utility function is downward sloping and bowed-in towards the origin (the standard U-shaped case just like a cobb-douglas functions if this consumer decides to NOT WORK AT ALL. then it must be the case that A IMRSLCI - [w] B (MRSLCI z wl OG IMRSLCs Iwi OD. MUL MUC CE None of the above Reset Selection Exam Passed

Consider the standard labor leisure choice model. Consumer gets utility from consumption (C) and leisure (13. She has H total hours. She works NS hours and receives the hourly wage, w. She has some non-labor income and pays lump-sum tax T. Further suppose -1)-0. The shape of utility function is downward sloping and bowed-in towards the origin (the standard U-shaped case just like a cobb-douglas functions if this consumer decides to NOT WORK AT ALL. then it must be the case that A IMRSLCI - [w] B (MRSLCI z wl OG IMRSLCs Iwi OD. MUL MUC CE None of the above Reset Selection Exam Passed

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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just answer the part e notice that you can do part e without the answer of abcd.
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Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L € [0, 1], and receives income w(1 – L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. Solution: The problem is max x L s.t. px ≤w(1 L) + y. x>0, LE [0,1] The budget constraint may also be written with equality since preferences are monotone. (b) Find the Marshallian demands for the consumption good and leisure. Solution: Using FOCs will find the maximum since preferences are Cobb-Douglas (and therefore convex). Dividing the FOCs L= Xp and x = Xw gives wL = px. Substituting into the budget constraint and checking the restriction L = [0, 1], we get and x(p, w, y) L(p, w, y) = = = 1 w+y…
Each day, Luke must decide his leisure hours, L, and his consumption, C. His utility function is given by the following equation U(L, C) = (C – 30)(L – 12). Luke receives $50 welfare payment per day. Show all the steps, with definition of every new notation used in the steps. a) Suppose that Luke's hourly wage is $5. Find Luke's daily budget constraint equation and graph it. b) If Luke's wage is $5 per hour worked, what is Luke's optimal consumption, (L*, C*)? · c) Assume that the wage is an unknown variable, w. What is Luke's leisure demand L(w)?- d) What is Luke's reservation wage, the lowest wage Luke is willing to work for? -
Consider an economy with 100 identical households and 100identical firms. Each household is endowed with one unit of time. Half of the households are endowed with equal shares of firm, while the rest areendowed with no firm shares. A householdís utility is u (x; r) = 2 ln(x*r^2) ,where x is consumption of goods, r = 1- l is leisure time and l is thehouseholdís labour supply. Each firm hires households to produce goodsaccording to technology y = L^1/2, where L denotes the labour input. Goodsprice p, wage rate w, and dividend income are all taken as given. Normalizew = 1. Do the following: (a) Derive the Marshallian demands, x (p, D) andr (p,D), where D is dividend. (b) Derive the firmís input demand functionL (p) and profit function pi(p). (c) List all the market-clearing conditions.(d) Calculate the equilibrium price p
Follow up question g. Explain why the utility curves cannot be drawn so as to induce the worker to work between L1 and L2 hours. h Yelowitz (1995) studies a Medicaid reform measure that reduced the Medicaid work disincentive. One of the reforms he studied raised the Medicaid eligibility threshold income level by 33%. Draw a new version of the fifigure with a new labor–income curve that reflflects this change. Explain how this change might induce someone currently working L1 hours per year to work more, and be sure to draw indifffference curves to support your answer.
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Using indifference curve analysis, show the effects of an increase in the hourly wage rate on labor supply (hours of work) and earnings. Identify the income and substitution effects.
Because Income depends on work effort and work effort depends on nutrition, suppose the relationship between income (Y) and total food availability (F) in a poor household is given by: Y = 10F + 20F2 – 0.6F3 a) If food availability in a two-person household is 20, would it be “rational” to share the food? Explain. b) If food availability in a two-person household is 30, would it be “rational” to share the food? Explain.
Consider a representative consumer with preferences over consumption e and leisure I given by u(e,l) = 1/4 * ln(c) + 3/4 * ln(l) Assume that the price of consumption is normalized to p = 1 and the consumer has h = 24 hours of total time available to divide between work and leisure. The consumer's wage per hour of work is w = 24 The consumer also receives dividend (profit) income of pi = 39 and pays lump-sum taxes of T = 7 (a) Write out the consumer's budget equation, and draw a graph of the budget constraint. (b) Solve for the optimal decisions e and 1. How many hours per day is the consumer working? (c) Suppose the consumer's wage decreases to w = 16 Solve for the new optimal choices of c and I". Relative to the solution in part (b), do consumption, leisure, and hours worked increase, decrease, or stay the same? Give an intuitive explanation for why these changes occur. (d) When the wage changes in part e, determine whether the consumer experiences an income effect, a substitution…
Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L = [0, 1], and receives income w(1 L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. (b) Find the Marshallian demands for the consumption good and leisure. (c) Find the indirect utility as a function of p, w, and y.
QUESTION 7: Budget constraints Everyone is endowed with 168 hours in a week (24X7). If you work 40 hours or less, you w=$20 per hour. If you work overtime, you earn w-$25. Assume the worker has M= non-labor income and that the price of the consumption good is p. Draw the budget constraint. Label the intercepts and the slopes in both the overtime and non-overtime region.