5. a b cthank you 5. Jesse's utility function is given by U(L, C) = C(L+8). There are 16 hour in a day. Hiswage is $10/hr. and he has $40 non-labor income.a. Find the budget constraint and then the optimal number of hours he should spendin Leisure (L).b. Is it possible for Jesse to consume $100 and have 10 hours of leisure? Explain.c. If the wage changed to $5/hr would Jesse work more or less? Are Leisure andConsumption gross complements or substitutes?d. Using the optimal amount of work from parts a and c, what is the elasticity ofJesse's labor supply? Is Jesse's labor supply elastic?

Answered: Jesse's utility function is given by…

Jesse's utility function is given by U(L, C) = C(L+8). There are 16 hour in a day. His wage is $10/hr, and he has $40 non-labor income.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5. a b c

thank you

5. Jesse's utility function is given by U(L, C) = C(L+8). There are 16 hour in a day. His
wage is $10/hr. and he has $40 non-labor income.
a. Find the budget constraint and then the optimal number of hours he should spend
in Leisure (L).
b. Is it possible for Jesse to consume $100 and have 10 hours of leisure? Explain.
c. If the wage changed to $5/hr would Jesse work more or less? Are Leisure and
Consumption gross complements or substitutes?
d. Using the optimal amount of work from parts a and c, what is the elasticity of
Jesse's labor supply? Is Jesse's labor supply elastic?

Expert Solution

Step 1

GIVEN

U ( L , C ) = C ( L + 8 )

MRS = L + 8 / C

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