Consider the following model of labour supply. There is a representative worker with the following utility function: U(C, L) = CªL*-a %3D where U is utility, C is consumption, L is leisure, and a is a parameter that governs the importance of consumption to the worker's utility relative to leisure. a must satisfy 0 < a < 1. Consumption and Leisure are always positive (by definition) The budget constraint and time constraint are: C = wh + V h = T – L where w is hourly wage, and V is non-labour income, T is time endowment. Here, w,V and T are parameters. h is hours work

Consider the following model of labour supply. There is a representative worker with the following utility function: U(C, L) = CªL*-a %3D where U is utility, C is consumption, L is leisure, and a is a parameter that governs the importance of consumption to the worker's utility relative to leisure. a must satisfy 0 < a < 1. Consumption and Leisure are always positive (by definition) The budget constraint and time constraint are: C = wh + V h = T – L where w is hourly wage, and V is non-labour income, T is time endowment. Here, w,V and T are parameters. h is hours work

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.8P

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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 1) Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labour market work?
Consider a consumer with the following utility function for consumption and leisure: U (R, C ) = 160 ln N + Y where N is the hours of leisure (“recreation”) consumed per day (24 maximum) and Y is dollars spent on consumption (p = 1). The consumer has an hourly wage w. (a) Assume the consumer derives all income from work at a wage rate w. Derive the labor supply function, LS(w). (b) For what values of w does the consumer work zero hours? (Hint: does a corner solution arise?) (c) Suppose that w = 10. How many hours does this consumer work? If the wage rate increases to w′ = 16, how many hours do they work? What is the total effect on the supply of labor?
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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 Queston: Show that the Slutsky equation holds for this worker
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 Give that the Slutsky equation holds for this worker.
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Consider worker 1 with non-labor income Y facing a wage offer w and a utility function defined over consumption and leisure U(c,l) = lnC + 4lnl Compare worker 1 with worker 2 whose utility function is described by U(c,l) = cl. Which worker places a higher value on labor market work?
Define the contingent worker?
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