We are given a utility function in which a household lives for just one period. hl+1/e u(c, h) = c - 1 + 1/e' where we have picked a utility function where hours worked h enter negatively into the leisure entering positively). The worker earns a real wage w = . But labor income is taxed at rate T, so that in the budget constraint, the labor income is (1-T)wh. The household doesn't have any assets, so c = wh. lity function (rather than Write out the household's optimization problem - utility function and budget constraint. Solve for the household's optimal labor supply h and consumption . How does the tax rate affect labor supply?

We are given a utility function in which a household lives for just one period. hl+1/e u(c, h) = c - 1 + 1/e' where we have picked a utility function where hours worked h enter negatively into the leisure entering positively). The worker earns a real wage w = . But labor income is taxed at rate T, so that in the budget constraint, the labor income is (1-T)wh. The household doesn't have any assets, so c = wh. lity function (rather than Write out the household's optimization problem - utility function and budget constraint. Solve for the household's optimal labor supply h and consumption . How does the tax rate affect labor supply?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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…
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) none
QUESTION 1 For the production function Q = KO.2L0.1 and the budget 133 = 7K + 5L find the optimal employment of L. Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 1.2, 1.14 = 1.1).
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.
Can you please help solve question 10 a,b and c please show full working so I can compare it to my own work Thank you
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