4. Consider a two period model with investment Imagine a preference shock that increases the representative consumer's utility for leisure. Therefore, the consumer chooses to consume more current leisure and less current consumption, and more future leisure and less future consumption. (everything else is equal) given the initial real interest rate r; a) What effect this preference shock has on labor supply curve? b) What effect this preference shock has on labor demand curve? c) What effect this preference shock has on output supply curve?

4. Consider a two period model with investment Imagine a preference shock that increases the representative consumer's utility for leisure. Therefore, the consumer chooses to consume more current leisure and less current consumption, and more future leisure and less future consumption. (everything else is equal) given the initial real interest rate r; a) What effect this preference shock has on labor supply curve? b) What effect this preference shock has on labor demand curve? c) What effect this preference shock has on output supply curve?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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