Consider individuals who have the following form for their utility function from leisure and consumption: U (c, 1) = A₁c¹10₂ where A, is an individual specific parameter. That is, each individual in the population is born with a different A₁. Let V be the non-labor income for the individual, let w and p be the hourly rate and the price of the consumption good respectively. Assume that an individual must sleep at least 7 hours a day, so the number of hours available for him/her is 24 - 7 = 17. Please complete the following questions: A. Derive the optimal number of leisure hours and the corresponding hours of labor supply. B. Discuss the impact that the non-labor income has on the labor supply of individuals. C. Suppose that there are two individuals, i and j, with the same 0₁, but with different 02, namely 8,2 and 02, with 0,2 0,2. How would the optimal behavior of the two individuals differ, if at all?

Consider individuals who have the following form for their utility function from leisure and consumption: U (c, 1) = A₁c¹10₂ where A, is an individual specific parameter. That is, each individual in the population is born with a different A₁. Let V be the non-labor income for the individual, let w and p be the hourly rate and the price of the consumption good respectively. Assume that an individual must sleep at least 7 hours a day, so the number of hours available for him/her is 24 - 7 = 17. Please complete the following questions: A. Derive the optimal number of leisure hours and the corresponding hours of labor supply. B. Discuss the impact that the non-labor income has on the labor supply of individuals. C. Suppose that there are two individuals, i and j, with the same 0₁, but with different 02, namely 8,2 and 02, with 0,2 0,2. How would the optimal behavior of the two individuals differ, if at all?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.10P

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