Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl Queston: Show that the Slutsky equation holds for this worker
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Consider worker 1 with non-labour income Y facing a wage offer w and a utility function
defined over consumption and leisure. U(c,l) = lnC + 4lnl
Queston:
Show that the Slutsky equation holds for this worker
Step by step
Solved in 4 steps
- Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure U(c,l) = lnC + 4lnl 1) Provide the functional form of the income effect from a marginal decrease in income. 2) Provide the functional form of the substitution and total income effects of a marginal increase in wage. 3) Show that the Slutsky equation holds for this worker.Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a.Provide the functional form of the income effect from a marginal decrease in income and provide the functional form of the substitution and total income effects of a marginal increase in wage.Consider worker 1 with non-labour income Y facing a wage offer w and a utility functiondefined over consumption and leisureU(c,l) = lnC + 4lnl1) Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Whichworker places a higher value on labour market work?12) Suppose the worker participates in the labour market. Derive worker’s compensated laborsupply function and the compensated labour supply elasticity with respect to wage as a functionof utility level and wage.3) Derive worker’s uncompensated labour supply function (for labour market participants andnon-participants) and the uncompensated labour supply elasticity (for labor market participants)with respect to wage as a function of non-labour income and wage.4) Derive worker’s income elasticity. Is leisure a normal or inferior good for this worker?5) Provide the functional form of the income effect from a marginal decrease in income.6) Provide the functional form of the substitution and total income…
- Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a) Derive worker’s income elasticity. Is leisure a normal or inferior good for this worker? b) Provide the functional form of the income effect from a marginal decrease in income. c) Provide the functional form of the substitution and total income effects of a marginal increase in wage.21. Let U=x 2 +y 2 is the utility function of a worker who has 10 hours that to be allocatedbetween labour supply (L) and leisure (x). Let y is a consumption good whose price is 1.Wage rate (w) is Rs 1 and non-wage income is 20. Find out L.a) 10 b) 0 c) 5 d) 8 e) none 22. On the basis of the above question, hen w=0 and non-wage income is 40, find out L.a) 10 b) 0 c) 5 d) 8 e) noneConsider the standard labor-leisure choice model. Consumer gets utility from consumption (C) and leisure (L). She has H total hours. She works NS hours and receives the hourly wage, w. She has some non-labor income T and pays lump-sum tax T. Further suppose (n-T)>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 function) If this consumer decides to NOT WORK AT ALL, then it must be the case that O A. MUL = MUC O B. MRSL,CI 2 w OC. IMRSL,CIs w O D. MRSL,C = w O E. None of above
- Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a) Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labour market work? b) Suppose the worker participates in the labour market. Derive worker’s compensated labor supply function and the compensated labour supply elasticity with respect to wage as a function of utility level and wage. c) Derive worker’s uncompensated labour supply function (for labour market participants and non-participants) and the uncompensated labour supply elasticity (for labor market participants) with respect to wage as a function of non-labour income and wage.Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl Derive worker’s income elasticity. Is leisure a normal or inferior good for this worker?Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl 1) Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labour market work?
- Consider the following Labour-Leisure Choice model. Utility function over consumption (C) and leisure (L) 1 3 U(CL) = cL4 Total hours H = 20 Labour hours: N = H-L Non-labour income: 1 = 20 Lump-sum tax T= 10 Hourly wage w = 3 Suppose that the hourly wage increases to 5 What is the substitution effect of this wage change on labour supply(N)? A. -1.10 B. -2.10 O C. +1.10 OD. +2. 10 O E. None of the aboveConsider the following labor-leisure choice model. Utility function over consumption (C) and leisure (L) U(C.L) = (1/3L1/3 Total hours: H = 40 Labor hours: NS = H - L Non-labor income: π = 30 Lumpsum tax: T = 10 Hourly wage: w = 4 Suppose the hourly wage changes to w = 3. What is the substitution effect of this change on labor supply? A. +2.65 B. -2.65 C. +3.48 D.-3.48 E. None of the aboveConsider worker 1 with non-labor income Y facing a wage offer w and a utility function defined over consumption and leisure U(c,l) = lnC + 4lnl Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labor market work?