Question
In: Economics
Suppose a worker's utility function is U(C, L) = C^2 +(2nL)^2 , where C denotes consumption...
Suppose a worker's utility function is U(C, L) = C^2 +(2nL)^2 , where C denotes consumption and L leisure. Let T denote time available to split between leisure and work, w denote the wage rate and V = 0 denote non-labor income (as in the lecture).
(a) What is the worker's optimal choice of C and L as a function of w, T, and n?
(b) What is the worker's reservation wage as a function of T and n?
(c) Suppose the labor market consists of a hundred workers with the above utility function, but the value of n is different for all of them. In particular, there is precisely one worker with n = 1, precisely one with n = 2, etc. Describe how you would construct the aggregate labor supply curve, i.e. the number of workers who would be willing to supply labor at any given w.
(d) What employment level corresponds to w = 13?
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
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