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In: Economics

Alex has a contract where he can vary her labour supply between 0 and 40hrs/week. He...

Alex has a contract where he can vary her labour supply between 0 and 40hrs/week.

He derive utility from consumption=c and leisure=L

His preferences are represented by utility U(c,L)=min(c,L)

Unit price of consumption = p, and the hourly wage rate is w.

1) Derive an expression for Alex's labour supply

2) The government is considering to introduce a consumption increasing policy, including, a transfer of money every month that Alex is eligible for. At what size of the transfer will Alex decide to not work? It's assumed that the hourly wage rate is 50 and the price of unit consumption is 30.

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Rahul Sunny answered 1 year ago
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