EconomicsConsider the following one-period model.ConsumerUtility function over consumption (C) and leisure (L)1 1U(C,L) = C2L2Total hours: H = 40Labour hours: NS = H-LNon-labour income: TTLump-sum tax: THourly wage: WFirmProduction function: Y = zF(Nd) = zNdTotal factor productivitiy: z = 2%3DGovernmentGovernment spending (exogenous): G = 20Suppose that the total factor productivity, z, increases to 4. What is the income effect of this wage change on labour supply(NS)?A. +6.89B. +4.39C. -6.89O D. -4.39O E. None of the above

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Suppose that the total factor productivity, z, increases to 4. What is the income effect of this wage change on labour supply(NS)? OA. +6.89 OB. +4.39 OC. -6.89 OD. -4.39 OE. None of the above

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Chapter1: Making Economics Decisions

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Question

Economics
Consider the following one-period model.
Consumer
Utility function over consumption (C) and leisure (L)
1 1
U(C,L) = C2L2
Total hours: H = 40
Labour hours: NS = H-L
Non-labour income: TT
Lump-sum tax: T
Hourly wage: W
Firm
Production function: Y = zF(Nd) = zNd
Total factor productivitiy: z = 2
%3D
Government
Government spending (exogenous): G = 20
Suppose that the total factor productivity, z, increases to 4. What is the income effect of this wage change on labour supply(NS)?
A. +6.89
B. +4.39
C. -6.89
O D. -4.39
O E. None of the above

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