Assume that consumption and leisure are perfect complements, that is, the consumer always desires a consumption bundle where the quantities of consumption and leisure are equal, that is, C=L 1) (Denote the total hours of time available by h, the real wage by w, the real dividend income from firms by pi (π), and the lump-sum tax by T. Write down the consumer’s budget constraint. 2) Determine the consumer’s optimal choice of consumption and leisure. 3) Assume that there is an increase in w . Show h
Assume that consumption and leisure are perfect complements, that is, the consumer always desires a consumption bundle where the quantities of consumption and leisure are equal, that is, C=L 1) (Denote the total hours of time available by h, the real wage by w, the real dividend income from firms by pi (π), and the lump-sum tax by T. Write down the consumer’s budget constraint. 2) Determine the consumer’s optimal choice of consumption and leisure. 3) Assume that there is an increase in w . Show h
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 1SQP
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Assume that consumption and leisure are perfect complements, that is, the consumer always desires a consumption bundle where the quantities of consumption and leisure are equal, that is, C=L
1) (Denote the total hours of time available by h, the real wage by w, the real dividend income from firms by pi (π), and the lump-sum tax by T. Write down the consumer’s budget constraint.
2) Determine the consumer’s optimal choice of consumption and leisure.
3) Assume that there is an increase in w . Show how the consumer’s optimal consumption bundle changes. Explain with reference to income and substitution effects
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