Jen's nonlabor income is V=$83 per week and her total time available in the week is T= 110 hours. Her marginal utility of leisure is MUL = 45/ L0.3, and her marginal utility of consumption is MUc 5/C0.4, What is her reservation wage? (please keep 1 decimal point)
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- Akua gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U (C, L) = C × L. Akua receives 660 GHS each week from her great-grandmother—regardless of how much she works. a. What will be Akua’s marginal rate of substitution. b. What will be Akua’s reservation wage? (Explain in detail)Suppose the wage you are being paid per hour doubles form $15 to $30. Would you decide to work more hours or fewer hours ? Is there an income and substitution effect involved in your decision about how many hours you choose to work? If so, what is being substituted for what?Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 168 hours. Her utility function is U ( C, L) = C x L. This functional form implies that Cindy’s marginal rate of substitution is C/L. Cindy receives $630 each week from her great-grandmother—regardless of how much Cindy works. What is Cindy’s reservation wage?
- (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?Illustrate (using a labor-leisure choice diagram) how a firm may induce a typical employee to lengthen his work week voluntarily by paying him premium wage rates for overtime hours.Explain in detail Discuss the possible substitution effect and the income effect of an increase in income on leisure time.
- The weekly preferences over consumption (C) and leisure(L) are defined by u(C, L) = √C + 3√L. The person receives a weekly allowance of m from The hourly wage is $18 per hour, and the person can work up to50 hours each week (T = z + L = 50), where z is the number of hours spent working). a)How many hours will the person work if her allowance is m= $450 per week b) What is the smallest allowance m for which the person will stopworking altogether (z∗ = 0) for a wage of w = 18?Darla gets her utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U(C, L) = C x L. This implies that Darla’s marginal rate of substitution is C / L Darla receives $750 each week from her grandparents–regardless of how much she works. What is Darla’s reservation wage?Discuss the possible substitution effect and the income effect of an increase in income on leisure time.
- Suppose that the owner of Boyer Construction is feeling the pinch of incrs associated with worker’s compensation and has decided to cut the wages of its two employees (Albert and Sid) from $25 per hour to $22 per hour. Assume that Albert and Sid view income and leisure as “goods,” that both experience a diminishing rate of marginal substitution between income and leisure, and that the workers have the same before- and after-tax budget constraints at each wage. Draw each worker’s opportunity set for each hourly wage. At the wage of $25 per hour, both Albert and Sid are observed to consume 12 hours of leisure (and, equivalently, supply 12 hours of labor). After wages were cut to $22, Albert consumes 10 hours of leisure and Sid consumes 14 hours of leisure. Determine the number of hours of labor each worker supplies at a wage of $22 per hour. How can you explain the seemingly contradictory result that the workers supply a different number of labor hours? (LO2, LO3, LO7)Follow up question g. Explain why the utility curves cannot be drawn so as to induce the worker to work between L1 and L2 hours. h Yelowitz (1995) studies a Medicaid reform measure that reduced the Medicaid work disincentive. One of the reforms he studied raised the Medicaid eligibility threshold income level by 33%. Draw a new version of the fifigure with a new labor–income curve that reflflects this change. Explain how this change might induce someone currently working L1 hours per year to work more, and be sure to draw indifffference curves to support your answer.A worker has 110 hours available in a week that can be used for leisure (L) or work (h). The utility function is U = (1 - α)ln(C) + α ln(L), where C is consumption. a) The price per unit of consumption is 1, the hourly wage is w, and the worker has a non-labor income of V. Show that the labor supply is: h* = (110(1-a)- (av)/w). Also, find the demand for consumption and leisure. b) What is the effect on labor supply of i) an increase in the hourly wage and ii) an increase in non-labor income? c) Set α = ½. What are C, L, and h when w = 200 and V = 10000? What is the reservation wage? d) What is the effect on labor supply of i) a 30% income tax and ii) a 10% wealth tax (on V)? e) What is the labor supply if V increases to 11600? f) An increase in V to 11600 gives the worker the same utility as w = 250 and V = 10000 (you do not need to show it). What are the income, substitution, and total effects on labor supply of an increase in wage from 200 to 250 while V remains at 10000?…