Question 5 Suppose that a representative consumer has the following utility function for leisure I and consumption C. U(L, C) = C³/4 1\/4 The real wage rate, w, is competitively determined to be 10. The number of hours, h, available to the consumer is 24. The profits, t, distributed to each consumer are 200 and taxes, T, are lump sum at 100. a). Given the above, how much leisure would the consumer choose? b) Given the above, how much consumption would the consumer choose? c) Given the above, how many units of time will the consumer spend working? Question 6 Describe, briefly and in your own words, what total factor productivity means. Provide an example of a change in TFP. Question 7 What is the firm's profit maximizing condition, assuming that its capital is fixed? Briefly discuss, in your own words, intuitively what this condition means.
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- Consider a representative consumer with preferences over consumption e and leisure I given by u(e,l) = 1/4 * ln(c) + 3/4 * ln(l) Assume that the price of consumption is normalized to p = 1 and the consumer has h = 24 hours of total time available to divide between work and leisure. The consumer's wage per hour of work is w = 24 The consumer also receives dividend (profit) income of pi = 39 and pays lump-sum taxes of T = 7 (a) Write out the consumer's budget equation, and draw a graph of the budget constraint. (b) Solve for the optimal decisions e and 1. How many hours per day is the consumer working? (c) Suppose the consumer's wage decreases to w = 16 Solve for the new optimal choices of c and I". Relative to the solution in part (b), do consumption, leisure, and hours worked increase, decrease, or stay the same? Give an intuitive explanation for why these changes occur. (d) When the wage changes in part e, determine whether the consumer experiences an income effect, a substitution…As a hypothetical case, suppose the typical individual has a utility function expressed as U = (C – 50)*(L – 10), where C is consumption and L is leisure time. The current wage, w,is $5 and she has a weekly return on assets of V0020= $100. She only has 60 hours per week to divide between work hours, h, and Leisure. A number of countries and communities are considering implementing a “Guaranteed Basic Income” as policy. A “Guaranteed Basic Income” is a government payment of a fixed a amount of money for each personSuppose the country of interest sets the weekly payment at $100. Using the Neo-classical labor supply with reference to specific numerical values discuss the consequences of the above “Guaranteed Basic Income”. Using the basic Supply and Demand for labor approach discuss the consequences of the “Guaranteed Basic Income” policy on the overall labor market. 3.Using a feedback approach, from the Neo-classical labor supply to market equilibrium and back to labor supply,…a. Based on only the first-order condition with respect to labor computed in part a (Based on the given Lagrangian, compute the representative consumer's first-order conditions with respect to consumption and with respect to labor). Qualitatively sketch two things in a diagram with the real wage on the vertical axis and labor on the horizontal axis. First, the general shape of the relation ship between w and n (perfectly vertical, perfectly horizontal, upward-sloping, downward-sloping, or impossible to tell). Second, how changes in / affect the relationship (shift it outward, shift it in inward, or impossible to determine). Briefly describe the economics of how you obtained your conclusions. (Note: In this question you are not to use the first-order condition with respect to consump tion nor any other conditions.) b. Now based on both of the two first-order conditions computed in part a, construct the consumption-leisure optimality condition. Clearly present the important steps and…
- , and you are considering a self-employment opportunity that may pay $10,000 per year or $40,000 per year with equal probabilities. What certain income would provide the same satisfaction as the expected utility from the self-employed position? a) $22,500 b) $15,000 c) $27,500 d) $25,00I JUST WANT THE DIAGRAM FOR EACH PART. PLEASE DRAW THE DIAGRAMS, DONT TYPE IT!!!!!! WRONG ANSWERS WILL BE REPORTED. Consider the representative consumer who decides consumption and leisure. The preference is given by U (C,L) = αln C + (1 −α) ln L. Assume h = 1, i.e., the time endowment is one day. Suppose the non-wage income π −T increases while the wage rate w falls at the same time. The size of the changes can be different. Determine the effects on consumption demand and labour supply (i.e., leisure demand). Use the indifference map to explain your results in terms of income and substitution effects for the following cases: (i) The increase in π −T exactly cancels out the drop in w, i.e., |∆ (π −T)|= |∆w|. (ii) The increase in π −T is greater than the drop in w, i.e., |∆ (π −T)|> |∆w|. (iii) The increase in π −T is smaller than the drop in w, i.e., |∆ (π −T)|< |∆w|.John and Peter are two representative consumers/investors who maximize the utility of consumption. John's utility of consumption is characterized as ln(x) + 2ln(y) while Peter puts more weight on the current consumption level and has a utility function of 2ln(x) + ln(y). John has a wealth of ($10, $20) thousand, while Peter has a wealth of ($20, $15) thousand now and next year, respectively. (a) What are the optimal consumption plans forJohn and Peter,respectively,if the interest rate is 5% per annum? (b) If John and Peter are the only investors/consumers, what is the equilibrium interest rate? (c) Further to part (b), how much do they borrow or lend to each other?
- Q2: Let a consumer’s daily hours of work is denoted by H, and hours of leisure by L. Consumer has no other source of income except wages for hours worked. She consumes what she earns each day. Her utility function is U(C, N) = ln(C) + 3 ln(N) Where C stands for the dollar amount of her consumption. Now answer following questions (a) Suppose the wage rate is 50Rs. per hour. Write down the consumer’s utility function and budget constraint with C and H as the choice variables. (b) How many hours will she choose to work, and what will be the resulting utility?Now,suppose N=3 with a market clearing interest rate. The first two agents are the same as earlier. The third agent has an endowment of 20 in the first period and consumes 15 in the second period. If the first two agents each consumed 21 units in the first period, how much did the third agent consume in the first period? Plz do fastIf TP = 8L2-0.2L3 based on this function; A. Find the value of L that maximizes output B. How many workers can maximize an extra production and the value of labor that maximize APL D. Find the maximum value of APL and MPL and maximum production
- 21. Let U=x 2 +y 2 is the utility function of a worker who has 10 hours that to be allocatedbetween labour supply (L) and leisure (x). Let y is a consumption good whose price is 1.Wage rate (w) is Rs 1 and non-wage income is 20. Find out L.a) 10 b) 0 c) 5 d) 8 e) none 22. On the basis of the above question, hen w=0 and non-wage income is 40, find out L.a) 10 b) 0 c) 5 d) 8 e) noneYou have the following observations about a consumer's purchase choices of two commodities, 1 and 2: When the prices were ($3,$6) consumer purchases bundle A = (2, 5). When the prices were ($7, $3) consumer purchases bundle C = (3, 5) You did not observe when consumer purchases Bundle B = (4, 4) . a. Compute the cost of each bundle A, B, C given each price pair. Then determine how the consumer ranks the bundles using Directly Revealed Preferred (DRP) relation. b. What can you say about the bundles using Indirectly Revealed Preferreu (IRP) relation?Enumerate THREE reasons as to why expected utility of wealth mignt be equally good or even a better measure than expected wealth in evaluating investment opportunities.(maximum of tiwo sentences per reason)