Question

In: Economics

1. Assume the following utility function U(c, l) = c1/3 l2/3 implying the relative importance of...

1. Assume the following utility function U(c, l) = c1/3 l2/3 implying the relative importance of the consumption and leisure are, 1/3 and 2/3 respectively. Given the budget constraint cP=W(24-l), in which W=$40 and P=$5, solve for the optimal consumption(c) and leisure(l) and labor supply (h) for this consumer.

2. What would happen to the optimal consumption (c), leisure (l) and labor supply (h), in the above question Q1 if the government offers a lump sum subsidy of $4,000 for each family? You don’t need to solve this numerically, but may answer this graphically using the budget set as we studied in the class.

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Suppose that the utility function is U(c, l) = c^(a) l^(1−a) where < a < 1....
Suppose that the utility function is U(c, l) = c^(a) l^(1−a) where < a < 1. Calculate the slope of an indifference curve for this utility function. What happens to the slope of the indifference curve when c decreases and l increases? Explain.
Question 1: Given the following utility function: (U=Utility, l=leisure, c=consumption) U = 2l + 3c and...
Question 1: Given the following utility function: (U=Utility, l=leisure, c=consumption) U = 2l + 3c and production function: (Y=Output, N or Ns=Labour or Labour Supply) Y = 30N1/2 If h = 100 and G =10 (h=Hours of labour, G=Government spending). Find the equilibrium levels of the real wage (w), consumption (c), leisure (l), and output (Y). Question 2: (Continuting from question 1) a, Find the relationship between total tax revenue and the tax rate if G = tWN. (G=Government spending,...
Question 1: Given the following utility function: (U=Utility, l=leisure, c=consumption) U = 2l + 3c and...
Question 1: Given the following utility function: (U=Utility, l=leisure, c=consumption) U = 2l + 3c and production function: (Y=Output, N or Ns=Labour or Labour Supply) Y = 30N1/2 If h = 100 and G =10 (h=Hours of labour, G=Government spending). Find the equilibrium levels of the real wage (w), consumption (c), leisure (l), and output (Y). Question 2: (Continuting from question 1) a, Find the relationship between total tax revenue and the tax rate if G = tWN. (G=Government spending,...
A person's utility function is U = C1/2 . C is the amount of consumption they...
A person's utility function is U = C1/2 . C is the amount of consumption they have in a given period. Their income is $40,000/year and there is a 2% chance that they'll be involved in a catastrophic accident that will cost them $30,000 next year. a. What is their expected utility? b. Calculate the actuarially fair insurance premium. c. What would their expected utility be if they purchased the actuarially fair insurance premium?
Assume that a worker has the Utility Function U(C,L) = C 0.25​ ​ L0.75​ “C” refers...
Assume that a worker has the Utility Function U(C,L) = C 0.25​ ​ L0.75​ “C” refers to consumption in dollars and “L” to hours of leisure in a day. The worker has an offered wage of $10 per hour, 20 hours available for leisure or work per day, and $90 dollars a day from non-labour income. a)     ​ Find the budget constraint equation of the individual.​                   b)    ​ Find the optimal choice for the individual in terms of units of...
Assume an individual has a utility function of this form U(C, L) = 40 + 5(CxL)...
Assume an individual has a utility function of this form U(C, L) = 40 + 5(CxL) This utility function implies that the individual’s marginal utility of leisure is 5C and her marginal utility of consumption is 5L. The individual has an endowment of V=$40 in non-labour income and T = 18 hours to either work (h) or use for leisure (L). Assume that the price of each unit of consumption good p=$2 and the wage rate for each hour of...
John’s utility function is represented by the following: U(C,L) = (C-400)*(L-100), where C is expenditure on...
John’s utility function is represented by the following: U(C,L) = (C-400)*(L-100), where C is expenditure on consumption goods and L is hours of leisure time. Suppose that John receives $150 per week in investment income regardless of how much he works. He earns a wage of $20 per hour. Assume that John has 110 non-sleeping hours a week that could be devoted to work. a. Graph John’s budget constraint. b. Find John’s optimal amount of consumption and leisure. c. John...
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.
Suppose that a representative consumer has the following utility function: U(C,L)=5ln(C)+2ln(L) and she has the budget...
Suppose that a representative consumer has the following utility function: U(C,L)=5ln(C)+2ln(L) and she has the budget constraint w(h-L)+pie-T. Derive the consumer's rules for consumption and leisure (solve for consumption and leisure "demand functions" as a function of exogenous variables). Graph and discuss the income and substitution effects for a consumer if her wages decreased (with labels).
Robert has utility function u(c,l) = cl over consumption, c, and leisure, l. Robert is endowed...
Robert has utility function u(c,l) = cl over consumption, c, and leisure, l. Robert is endowed with 16 hours of leisure. Let the price of consumption be p = 1. Robert can sell his time in the labor market at hourly wage, w. The equilibrium we will consider implies zero firm profits, so labor income is the only source of income for consumers. Thus, Robert’s budget line can be written by c + wl = 16w. Production of the consumption...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT