1. An individual derives utility from the consumption of a basket of goods, c and leisure time, & given by U(c₂l) = cºl(¹-a) where 0 < a < 1, is a constant; and must decide how to allocate her time between work, L and leisure to maximize her utility. The individual has a total of 24 hrs in a day (L+= 24) and total consumption is constrained by her income; i.e., c = wL, where w the real per hour, is taken as given.
1. An individual derives utility from the consumption of a basket of goods, c and leisure time, & given by U(c₂l) = cºl(¹-a) where 0 < a < 1, is a constant; and must decide how to allocate her time between work, L and leisure to maximize her utility. The individual has a total of 24 hrs in a day (L+= 24) and total consumption is constrained by her income; i.e., c = wL, where w the real per hour, is taken as given.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![1. An individual derives utility from the consumption of a basket of goods, c and leisure
time, given by
U(c, l) = c²l(¹-a)
where 0 < a < 1, is a constant; and must decide how to allocate her time between
work, L and leisure to maximize her utility. The individual has a total of 24 hrs in a
day (L + l = 24) and total consumption is constrained by her income; i.e., c = wL,
where w the real per hour, is taken as given.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc3585354-64d7-4f4a-b055-4a9b75b3799d%2Fbdc75b25-3d93-4368-8198-00f0a086b514%2Frtxj7ib_processed.png&w=3840&q=75)
Transcribed Image Text:1. An individual derives utility from the consumption of a basket of goods, c and leisure
time, given by
U(c, l) = c²l(¹-a)
where 0 < a < 1, is a constant; and must decide how to allocate her time between
work, L and leisure to maximize her utility. The individual has a total of 24 hrs in a
day (L + l = 24) and total consumption is constrained by her income; i.e., c = wL,
where w the real per hour, is taken as given.
![(b) What is the effect of an increase in w on labor supply? Provide a brief economic
intuition?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc3585354-64d7-4f4a-b055-4a9b75b3799d%2Fbdc75b25-3d93-4368-8198-00f0a086b514%2F4ju6xum_processed.png&w=3840&q=75)
Transcribed Image Text:(b) What is the effect of an increase in w on labor supply? Provide a brief economic
intuition?
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