Suppose that the utility function is u(c, l) utility function. = call-a, where 0 < a < 1 is the parameter of the (a) Please find the goods demand function c(w, d, T), leisure demand function (w, d, T), and the labor supply function ns (w, d, T). Note that these three functions contain the parameter a. Are both c and normal goods for this consumer? Explain. Hint: uc = aca-111-a a, and u₁ = (1-a)cal-a (b) Let a = 1/3 and d - T = 3. Plot c(w, d, T) and ns (w, d,T) curves you find in (a). Explain the effects on c(w, d, T) and n³ (w, d, T) if d - T rises to 6. Hint: use w = 12, 48, 96, 192, 384 to find points on the curves, and draw the curves by linking these points.
Suppose that the utility function is u(c, l) utility function. = call-a, where 0 < a < 1 is the parameter of the (a) Please find the goods demand function c(w, d, T), leisure demand function (w, d, T), and the labor supply function ns (w, d, T). Note that these three functions contain the parameter a. Are both c and normal goods for this consumer? Explain. Hint: uc = aca-111-a a, and u₁ = (1-a)cal-a (b) Let a = 1/3 and d - T = 3. Plot c(w, d, T) and ns (w, d,T) curves you find in (a). Explain the effects on c(w, d, T) and n³ (w, d, T) if d - T rises to 6. Hint: use w = 12, 48, 96, 192, 384 to find points on the curves, and draw the curves by linking these points.
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.13P
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Please correct answer and don't use hand raiting
Transcribed Image Text:Suppose that the utility function is u(c, l)
utility function.
= call-a, where 0 < a < 1 is the parameter of the
(a) Please find the goods demand function c(w, d, T), leisure demand function (w, d, T),
and the labor supply function ns (w, d, T). Note that these three functions contain the
parameter a. Are both c and normal goods for this consumer? Explain. Hint: uc =
aca-111-a
a, and u₁ = (1-a)cal-a
(b) Let a = 1/3 and d - T = 3. Plot c(w, d, T) and ns (w, d,T) curves you find in (a).
Explain the effects on c(w, d, T) and n³ (w, d, T) if d - T rises to 6. Hint: use w =
12, 48, 96, 192, 384 to find points on the curves, and draw the curves by linking these
points.
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