Suppose that the indifference curves between consumption and leisure are concave to the origin. How many hours will a person allocate to leisure activities?
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1. Suppose that the indifference curves between consumption and leisure are concave to the origin. How many hours will a person allocate to leisure activities?
2. Suppose that the price of goods purchased in the marketplace rises. What is the impact of this price increase on the worker's reservation wage, on the worker's probability of entering the labor force, and on hours of work?
3. What happens to a worker's desired hours of work if employers pay an overtime premium equal to "time and a half'(that is, 1 .5 times the straight-time wage) for any hours worked in excess of 40 hours? What would happen to hours of work if the overtime premium were raised to double the straight-time wage?
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- 4. Winona has 80 hours to divide between leisure and labor. Her utility function is u(r,c) = f(r) + c, when r represents hours of leisure, c represents dollars of consumption, and fis strictly concave. Winona's wage is wo = $15/hr. initially, then it rises to wi = $20/hr. (i) Explain what happens to Winona's labor supply when the wage rises, and why. (ii) Explain how the answer to (i) would change if Winona were to win a lottery.5. Suppose that John could work 365 days per year and could earn $200 per day for each day he worked. a. Draw his budget line with respect to his labor-leisure tradeoff b. Suppose that John chooses to work 200 days per year. Draw the appropriate indifference curve, and not his equilibrium wage income and labor-leisure choices c. Suppose that John’s wage rises to $210 per day. Show how his equilibrium level of income and labor-leisure will change. d. Suppose John is ill ten days per year. Draw the impact of this illness on the equilibrium above. How will it change his equilibrium allocation of earnings and labor vs. leisure?Ann has non-labour income M; hourly wage rate w. She can choose how many hours she works. She can use her income to purchase consumption, each unit of consumption has price p. (a) Initially, Ann decides not to work at all. Using a consumption-leisure diagram, explain her behaviour. (b) Now, her hourly wage rate increases to w’ > w. She decides to start working. Using an appropriate diagram, explain how she decides how many hours to work using substitution and income effects.
- 4. Akua gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U (C, L) = C × L. Akua receives 660 GHS each week from her great-grandmother—regardless of how much she works. a. What will be Akua’s marginal rate of substitution. b. What will be Akua’s reservation wage? (Explain in detail)2. Let an individual’s utility function be given by where C and L are consumption and leisure respectively, and g, a and b are positive constants with a + b = 1. Derive the individual’s Marshallian labor supply function and comment on the magnitudes of the income and substitution effects of wage change. Derive the general form of Slutsky equation of labor supply.Explain in detail Discuss the possible substitution effect and the income effect of an increase in income on leisure time.
- 1) What would be the substitution effect and the income effect of a wage increase? 2) What do you think accounts for the wide range of savings rates in different countries3. You are given the following information about the output of good X as successive workers are added to a fixed amount of land and capital equipment. 11 121 Number of workers 10 12 13 14 15 16 Total output (unit of X) 100 144 169 189 195 200 At what level of employment does MPP become a maximum? At what level of employment does APP become a maximum? At what level of employment do diminishing returns set in? Can you determine from this information how many workers the firm will employ? Explain your answer. Draw graphs to show all the relationships a) e)Two labor-leisure choice diagrams are shown below. In both cases, the labor-leisure choice diagrams show how the individual's desired amount of leisure is influenced by the increase in her or his wage rate from w/ to w₂. INCOME a. 24W2 24W₁ Figure A b. Leisure is normal. Figure A HOURS OF LEISURE Figure A Figure B For each of the following statements, please indicate if the statement is TRUE (between wage rates w/ and w₂) for Figure A, Figure B, both figures, or neither figure. Please circle your response. The substitution effect is zero. Figure A Figure B Figure B c. Leisure is neither normal nor inferior. INCOME Figure B 24W2 24W1 Both figures Both figures HOURS OF LEISURE Both figures Neither figure Neither figure Neither figure
- 7. Suppose that you were the manager of a large retail store that was currently experiencing a shoplifting problem. Every hour, approximately $15 worth of merchandise was being stolen from your store. Suppose that a security guard would completely eliminate the shoplifting in your store. If you were interested in maximizing your profits, should you hire a security guard if the wage rate of security guards was $20 per hour? Why or why not? What does this imply about the relationship between average shoplifting per hour in the economy and the wage rates of security guards?ASAP pls Discuss the possible substitution effect and the income effect of an increase in income on leisure time..4.1 Cindy gets utility from consumption (C) and leisure (L), and has a weekly timebudget ofT= 110 hours. Her utility function isU(C, L) = C L. She receives $660 each week from her great-grandmother regardless of how much Cindy works. What is Cindy's reservation wage? 4.2What is Cindy's optimal labor supply (h) and consumption (C) if her wage is 10 dollars per hour? Show your work.4.3