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a) Find the value of consumption, leisure and labour supply. Find the Utility of the Worker b) How does the labour supply change is the worker now get a bonus of $100 regardless of number hours worked? Is leisure normal or inferior. c) Now assume that the wages fall to $10/2-hour – how does the labour supply

a) Find the value of consumption, leisure and labour supply. Find the Utility of the Worker b) How does the labour supply change is the worker now get a bonus of $100 regardless of number hours worked? Is leisure normal or inferior. c) Now assume that the wages fall to $10/2-hour – how does the labour supply

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A workers utility function is defined as follows: U = 4 L1/4 c3/4 Time endowment is 60 hours The current wage rate w = $20/2-hour slot (the workers cannot work single hours – the minimum slot is 2 hours) a) Find the value of consumption, leisure and labour supply. Find the Utility of the Worker b) How does the labour supply change is the worker now get a bonus of $100 regardless of number hours worked? Is leisure normal or inferior. c) Now assume that the wages fall to $10/2-hour – how does the labour supply change – what can we conclude about substitution and income effect. By how much is the consumer worse off as compared to the first case when wage = $10/2-hour
Transcribed Image Text:A workers utility function is defined as follows: U = 4 L1/4 c3/4 Time endowment is 60 hours The current wage rate w = $20/2-hour slot (the workers cannot work single hours – the minimum slot is 2 hours) a) Find the value of consumption, leisure and labour supply. Find the Utility of the Worker b) How does the labour supply change is the worker now get a bonus of $100 regardless of number hours worked? Is leisure normal or inferior. c) Now assume that the wages fall to $10/2-hour – how does the labour supply change – what can we conclude about substitution and income effect. By how much is the consumer worse off as compared to the first case when wage = $10/2-hour
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