Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 16, Problem 16.2P
a)
To determine
To find:
Expenditure function for the given function:
b)
To determine
To know:
Compensated
c)
To determine
To ascertain:
Compensated labor supply function
d)
To determine
To Know:
Comparison of compensated supply functions.
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Students have asked these similar questions
If the consumer's non-labor income increases while wages remain unchanged, what will
happen to the budget line?
A) The budget line shifts inward without a change in slope.
B) The budget line rotates inward from the intercept on the horizontal axis.
C) The budget line rotates outward from the intercept on the vertical axis.
D) The budget line shifts outward without a change in slope.
An optimum labor-leisure that occurs as a corner solution
A) can be an equilibrium in the aggregate economy.
B) includes the consumption of only one good.
C) cannot exhaust the budget constraint.
D) includes the exact same amounts of each good.
) If a firm is a price taker in both the labor market and the output market, it will
A) hire labor until the marginal product of labor equals the output price.
B) hire labor until the marginal product of labor equals zero.
C) earn zero economic profit in the short run.
D) hire labor until the marginal product of labor equals the wage rate.
Question atatched
On average, people sleep 8 hours per day
meaning that each individual has 16 hours
per day to allocate between labour and
leisure. Assuming that the wage rate is $15
per hour and there are non-labor income is
zero. The utility function of an individual is
given by U(Y, L) = YL and for simplicity, the
price index for real income is 1. a.
Determine the budget constraint. b.
Determine the marginal rate of substitution.
c. What are the optimal labor and leisure
hours? d. At the optimal relationship, what
is the utility level for the individual?
Knowledge Booster
Similar questions
- Assume Lorena derives utility from consumption and leisure. Through the following utility function. U=VC-R where C is consumption and R is hours of leisure consumed per day (there are 24 hours in her day). Let w be the wage rate and H be the hours of work chosen. The price of consumption goods, C, is $1. In addition, assume Lorena has $M amount of non- wage income each day. Set up the utility maximizing Lagrangian needed to maximize utility subject to the budget constraint but do not solve for the demand for C and R. a b. Draw the consumer choice model for this situation (fully label the graph). Use it to graphically derive/describe/explain her labor supply function and explain what would be true for her labor supply to rise or fall when the wage rises (you may want to draw the graph twice. Measure and explain the loss in consumer surplus using the concept of compensating variation. g. h. What is the expenditure-price elasticity equation for y? That is, the elasticity for the % change…arrow_forwardJohn works in a shoe factory. He can work as many hours per day as he wishes at a wage rate w. Let C be the amount of dollars he spends on consumer goods and R. be the number of hours of leisure that he chooses. John's preferences are represented by U(C, R) = CR utility function Question 2 Part a John earns $8 an hour and has 18 hours per day to devote to labor or leisure, and he has $16 of nonlabor income per day. Draw John's indifference curves, budget constraints and solve for his optimal consumption and leisure choices.arrow_forwardConsider an individual whose utility function is U(C, R) = 2C - (4 - R) 2 where R is the amount of leisure the consumer experiences per day. Suppose that the individual normally sleeps T hours a day, and they can spend the remaining hours between work and leisure. The individual receives an hourly wage of w > 0 and has also an income of Y > 0 a day from non - labour sources. The price of consumption goods is p per unit.arrow_forward
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- Consider 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 abovearrow_forwardTerry’s utility function over leisure (L) and other goods (Y ) is U(L, Y ) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? Determine the MRS of leisure for labour (b) Draw a leisure-influenced labor curvearrow_forwardTerry’s utility function over leisure (L) and other goods (Y) is U (L, Y) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? (b) Determine the MRS of leisure for labour (c) Draw a leisure-influenced labor curvearrow_forward
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