Using the budget constraint, PC=WT-l, where C is consumption and l is leisure and T is...

Using the budget constraint, PC=WT-l, where C is consumption and l is leisure and T is total time, show that a cultural constraint or government requirement to work 8 hours per day will tend to make total satisfaction in society lower than it could be if there is no restriction on the number of hours a worker chooses to work.

Expert Solution

SOLUTION:-

T = working hour + leisure (L)

Working hour = T - L

Budget constraint C = w(T - L) ; where w = wage rate

* Total satisfaction after fixing the working hour at 8 hours will reduce if the willingness to work of the workers were free to choose their working hours at the given wage rate.

* They definitely optimise their utility by choosing less work and more leisure as this have no effect on their wage before regulations.

* In the figure, the vertical straight line represents 8 hours of work and L2T is the hours of leisure consumed.

* Intitially, IC1 represents the utility level of the workers.

* However, government fixed 8 hours of work, the working hours of the workers has incraesed and leisure time has been reduced.

* Therefore, the consumer with the given budget constraint is now on the lower IC, IC2.

THANK YOU, if any queries please leave your valuable comment on comment box......

If possible please rate the answer as well......

Rahul Sunny answered 2 years ago

A. In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10...

A. In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10 determine the optimal amount of C and L and the equation for the labor supply. B. Suppose w2=$12 determine the new optimal C and L and determine the substitution and income effects of the price change of leisure.

2a) In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10...

2a) In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10 determine the optimal amount of C and L and the equation for the labor supply. b) Suppose w2=$12 determine the new optimal C and L and determine the substitution and income effects of the price change of leisure

In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10 determine...

In the consumption/leisure model, let the consumer’s utility function be U(C,l)=C.25+l.25. Suppose Pc=$1 and w1=$10 determine the optimal amount of C and L and the equation for the labor supply.

Consider an individual with utility function c^αl^1−α, where c is consumption, l is leisure, and α...

Consider an individual with utility function c^αl^1−α, where c is consumption, l is leisure, and α ∈ (0, 1). The individual is endowed with R units of nonlabor income and T units of time. The individual earns wage w for each unit of time worked. The price of a unit of consumption is p. (a) What is the budget constraint for this individual? (b) What is the price of leisure? (c) Set up the appropriate Lagrangian for this agent’s problem....

Suppose preferences for consumption and leisure are: u(c, l) = ln(c) + θ ln(l) and households...

Suppose preferences for consumption and leisure are: u(c, l) = ln(c) + θ ln(l) and households solve: maxc,l u(c, l) s.t. c=w(1−τ)(1−l)+T Now suppose that in both Europe and the US we have: θ = 1.54 w=1 but in the US we have: τ = 0.34 T = 0.102 while in Europe we have: τ = 0.53 T = 0.124 The values for τ and T above are not arbitrary. If you did the calculations correctly, you should find that...

Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100)  (L – 40).

Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C – 100)  (L – 40). This utility function implies that Shelly’s marginal utility of leisure is C – 100 and her marginal utility of consumption is L – 40. There are 110 (non-sleeping) hours in the week available to split between work and leisure. Shelly earns $10 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much...

8、Assume that utility depends on consumption c and leisure l , U(c,l) . (a) Define reservation...

8、Assume that utility depends on consumption c and leisure l , U(c,l) . (a) Define reservation wage. (b) “The reservation wage increases with (i) non-labor income, (ii) fixed monetary costs of work, (iii) fixed time costs of work, and (iv) the price of consumption.” Prove or disprove each of these four claims.

Cindy gains utility from consumption C and leisure L. The most leisure she can consume in...

Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 80 hours. Her utility function is: U(C, L) = C(1/3) × L(2/3). a) Derive Cindy’s marginal rate of substitution (MRS). Suppose Cindy receives $800 each week from her grandmother––regardless of how much Cindy works. What is Cindy’s reservation wage? b) Suppose Cindy’s wage rate is $30 per hour. Write down Cindy’s budget line (including $800 received from her grandmother). Will...

2-6. Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C -...

2-6. Shelly’s preferences for consumption and leisure can be expressed as U(C, L) = (C - 100) × (L - 40) This utility function implies that Shelly’s marginal utility of leisure is C - 200 and her marginal utility of consumption is L- 40. There are 110 (non-sleeping) hours in the week available to split between work and leisure. Shelly earns $10 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much...

Answer the following questions using the standard leisure-work choice model a)Draw a budget constraint for a...

Answer the following questions using the standard leisure-work choice model a)Draw a budget constraint for a worker has a job which pays a wage of $10.00 per hour. Draw an indifference map for typical worker. Assume that the worker is able to choose any number of hours of work and this worker’s optimal position is to work 8 hours a day. Show this point on your graph. b)Suppose the worker now receives $60 per day non-labor income. On your graph...

Question