Question

19. Consider a household where the husband can earn a market wage of $15 per hour and has a marginal productivity in the household that is the equivalent of $12. The wife can earn a market wage of $20 and has a marginal productivity in the household that is the equivalent of $15. Suppose initially that their marginal household productivities do not depend on the time that the other spouse spends at home.

19a. If the couple decides to have only one of them work for pay outside the home, who should it be?

19b. Would it make sense for both the husband and wife to work for pay outside of the home?

19c. Assuming both members of the couple are working, how would an increase in the wife’s wage affect her work hours? Would an increase in the wife’s wage cause the husband to increase or decrease his work hours?

19d. How would your answer to 20c be different if you knew that the couple were substitutes in household production?

19e. How would your answer to 20c be different if you knew that the couple were complementary in household consumption?

Answer 1

Given market wage of trusband - $15 - Marginal productivity = $12. - masked wage of life = $20 - Marginal productivity = $15. - 6 Net gain if husband worts - 1.0 -) 15.12 - $3 Net again if life Horks = 3 - 4 - 2015 = $5 if husband works outside and life stays at home results in the gain of $30 per hour. if wife works outside and Husband stoups at. home results in the gain of 932 per hout, so, if the couple decides to have only one of them work for pay outside the home. it should be wife.

196) yes, It would make sense for both the husba. and and wife to work for pay outside of the home, because if both of them work at outside they would earn. 185 per hour which is the maximum payout they can get with the combinations of one stays at home, both stays at home and both Hooks at outside.. so, it allows each to earn. maximum wages gather than Woutieng at home. 19 c) If both members of the couple are working the effects involve in this one is income effect and the other is substitution effect which is the effect of a change in the relative porces of goods on patterns of consumption on the other. hand income offed is the effect on real income When porce changes whether it can be postlive or negative, if income effect is greater than substitution effect. then there is an increase in the

Wife's Wage can decrease decrease heg wat hours, on the. other hand it's vice verca if substitution of the hoge is greater than the to come effed. If Wife's ulage increases then the 1168 bond wenn on the Mosband wlosting tours decreases. 19d) do increase in the wife's Working hours will increase her marginal production in their house when these couples were substituts in trousehold production. Thich creates an. opportunity so that husband spends his booking tours more in house hold production while. Wife spends her working hours more at outside.