Consider the following Labour-Leisure Choice model. Utility function over consumption (C) and leisure (L) 1 3 U(C L) = cL4 Total hours H= 20 Labour hours: N =H-L Non-labour income: n = 20 Lump-sum tax T= 10 Hourly wage w = 3 Suppose that the hourly wage increases to 5 What is the substitution effect of this wage change on labour supply(NS?
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- Consider the following labor-leisure choice model. U(C,L) = C^2/3L^1/3 C = wN + π – T H= N+ L Where C: consumptionL: leisureN: hours workedH = 50 : total hoursw = 4 : hourly wageπ = 20 : non-labor income T = 10 : lump-sum tax Suppose the hourly wage changes to w = 5. Perform a decomposition and fill in the table C L N Substitution Effect Income Effect Total EffectIn a consumption-leisure model, where P is the price of consumption and w is the wageand h is the hours, how do I mathematically calculate the effect of wage jncrease (wage/price of good) on the ff: >consumption>leisure>hours worked How do I know which is stronger between income effect and substitution effect due to increase in w/p? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Consumption when young and consumption whenold are both normal goods for Seymour, a workersaving for retirement. When the interest rate falls,what happens to Seymour’s consumption when old?a. It definitely increases.b. It definitely decreases.c. It increases only if the substitution effect exceedsthe income effect.d. It decreases only if the substitution effectexceeds the income effect.
- Suppose that a person has 2000 hours to allocate each year between leisure and work. a. Derive the equation of his budget constraint given an hourly wage of $(15)/hour. b) Graph his budget constraint line based on the equation you derived in part a. (Consumption (C) on the vertical axis and leisure (L) on the horizontal axis). Please make sure to include the value for the vertical and horizontal intercepts. c) Now suppose that the local government introduces an income guarantee program for single parents in which the income transfer is $10,000 per year if an individual does not work during that year (this dollar amount represents the benefit guarantee). If the individual decides to work, this transfer program imposes a 100% benefit reduction rate (e. g.. each additional hourly wage earned is reduced by 100%). Derive the new budget constraint equation that corresponds to this scenario. d) Draw the budget line that corresponds to the new scenario on a new graph. (Consumption (C) on the…Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a.Provide the functional form of the income effect from a marginal decrease in income and provide the functional form of the substitution and total income effects of a marginal increase in wage.Consider worker 1 with non-labour income Y facing a wage offer w and a utility function defined over consumption and leisure. U(c,l) = lnC + 4lnl a) Derive worker’s income elasticity. Is leisure a normal or inferior good for this worker? b) Provide the functional form of the income effect from a marginal decrease in income. c) Provide the functional form of the substitution and total income effects of a marginal increase in wage.
- Terry’s utility function over leisure (L) and other goods (Y ) is U(L, Y ) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? Determine the MRS of leisure for labour (b) Draw a leisure-influenced labor curveTerry’s utility function over leisure (L) and other goods (Y) is U (L, Y) = Y + LY. The associated marginal utilities are MUY = 1 + L and MUL = Y. He purchases other goods at a price of $1, out of the income he earns from working. Show that, no matter what Terry’s wage rate, the optimal number of hours of leisure that he consumes is always the same. (a) What is the number of hours he would like to have for leisure? (b) Determine the MRS of leisure for labour (c) Draw a leisure-influenced labor curve(i) Keith’s marginal utility of leisure is C – 20 and his marginal utility of consumption is L – 50. There are 110 hours in the week available to split between work and leisure. Keith receives £250 of welfare payments each week regardless of how much he works (assume he spends all of his welfare payments on consumption). What is Keith’s reservation wage? (ii) Suppose Danny receives the same welfare payments each week as Keith and has the same number of available hours (110). However, Danny’s indifference curve is flatter than Keith’s. How would his reservation wage compare to Keith’s? Why?
- This question will analyze the impact on a person's labour supply from a shock to their partner's job. Assume leisure is a normal good. Let's assume Vanessa has a wage rate of $20 per hour. Recently her partner, Bill, had to take a wage cut at work, with his wage falling from $45 per hour to $30 per hour, but allowed them to continue working 40 hours per week. Analyze the decision of the household over choice consumption and Vanessa's leisure, taking Bill's hours as given (constant).Draw the indifference curve for someone decidinghow to allocate time between work and leisure.Suppose the wage increases. Is it possible that theperson’s consumption would fall? Is this plausible?Discuss. (Hint: Think about income and substitutioneffects.)Consider a representative agent with the utility function U = ln(Ct)+ Nt The budget constraint is Ct = wtNt +Dt where wt is the wage and Dt is non-wage income (i.e. a dividend from ownership in the firm). The agent lives for only one period (period t), and hence its problem is static. (a) Derive an optimality condition characterizing optimal household behav- ior. (b) Solve for the optimal quantities of consumption and labor. Plz do fast asap, urgent.
