Homework Answers
(g)
The optimal allocation bundle is a function of h. As h decreases, the optimal consumption bundle also decreases.
(i)
The optimal allocation bundle is the point where the indifference curve is tangential to the budget constraint. At this point MRS = w. The following graph show the optimal allocation bundle:
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Question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure l...
Question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure I...
Question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure I represented by Uel)Inc + InI. Her budget constraint is c S wN, where w is the wage rate and N -the number of hours worked. The representative agent also chooses how to allocate her time between work and leisure activities given her time constraint 1 + N = h, where h is the total number of hours. a) (2 pt.) Combine the budget constraint...
Alt Alt Fn question 2 (22 pts.) Consider a representative agent with preferences over consumption c...
Alt Alt Fn question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure l ue l) = In c + In I. Her budget constraint is c wM, where w is the wage hours worked. The representative agent also chooses how to allocate her time between w activities given her time constraint l + N = h, where h is the total number of hours. represented by rate and N - the number of ork...
Question 2 (22 pts Consider a representative agent with preferences over consumption c and leisune eted...
Question 2 (22 pts Consider a representative agent with preferences over consumption c and leisune eted by D(c,l).Inc+1η l. Her budget constraint is.c wM, wherw w the wage fat and N-the rof hours worked. The representative agent aso chooses how to allocate her time between work and lsu activities gven her time constraintN-h, where h is the total number oll hours al pt) Combine the budget constraint and the time constraint of the regesentative agent into a single constraint b)...
Suppose Andrea has preferences over consumption (C) and leisure (l). Suppose also her time constraint is...
Suppose Andrea has preferences over consumption (C) and leisure (l). Suppose also her time constraint is such that l + h = h¯, where h is the number of hours worked and h¯ is the time available. Suppose also h¯ = 8. If she works she receives an hourly wage (?) of 10. (a) (5 points) Suppose first her income depends only on the number of hours worked. Write and plot her budget constraint. What is the slope of her...
Consider a representative consumer who has preferences over an aggregate consumption good c and leisure l....
Consider a representative consumer who has preferences over an aggregate consumption good c and leisure l. Her preferences are described by the utility function: U(c,l) = ln(c) + ln(l) The consumer has a time endowment of h hours which can be used to work at the market or enjoyed as leisure. The real wage rate is w per hour. The worker pays a proportional wage tax of rate t, so the worker’s after-tax wage is (1−t)w. The consumer also has...
A worker's preferences over consumption (c) and leisure (l) can be represented by U(cl) = cl....
A worker's preferences over consumption (c) and leisure (l) can be represented by U(cl) = cl. The price of consumption is given by p = 1 and the wage by w=1 (a) Suppose we measure leisure in hours per day such that the maximum value I can take is 24. Let's represent hours worked by h; then we have h = 24-1. Write the Budget Constraint of this worker in terms of c and l. (b) Explain briefly why w/p...
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Clark gains utility from consumption c and leisure l and his preferences for consumption and leisure can be expressed as U(c, l) = 2(√ c)(l). This utility function implies that Clark’s marginal utility of leisure is 2√ c and his marginal utility of consumption is l √ c . He has 16 hours per day to allocate between leisure (l) and work (h). His hourly wage is $12 after taxes. Clark also receives a daily check of $30 from the...
3. Consider a representative consumer who has preferences over an aggregate consumption good e and leisure....
3. Consider a representative consumer who has preferences over an aggregate consumption good e and leisure. Her preferences are described by the uility function: U(c,l) In(e) +In(l) The consumer has a time endowment of h hours which can be used to work at the market or enjoyed as leisure. The real wage rate is w per hour. The worker pays a proportional wage tax of rate t, so the worker's after-tax wage is (1 t). The consumer also has dividend...
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A representative consumer has preferences described by the utility function: uc, 1) = ln(c- c) +...
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Question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure I represented by Uel)Inc + InI. Her budget constraint is c S wN, where w is the wage rate and N -the number of hours worked. The representative agent also chooses how to allocate her time between work and leisure activities given her time constraint 1 + N = h, where h is the total number of hours. a) (2 pt.) Combine the budget constraint...
Alt Alt Fn question 2 (22 pts.) Consider a representative agent with preferences over consumption c and leisure l ue l) = In c + In I. Her budget constraint is c wM, where w is the wage hours worked. The representative agent also chooses how to allocate her time between w activities given her time constraint l + N = h, where h is the total number of hours. represented by rate and N - the number of ork...
Question 2 (22 pts Consider a representative agent with preferences over consumption c and leisune eted by D(c,l).Inc+1η l. Her budget constraint is.c wM, wherw w the wage fat and N-the rof hours worked. The representative agent aso chooses how to allocate her time between work and lsu activities gven her time constraintN-h, where h is the total number oll hours al pt) Combine the budget constraint and the time constraint of the regesentative agent into a single constraint b)...
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