Recall that leisure time in our model of the representative consumer is intended to capture any time spent not working in the market, including production at home such as yard work and caring for children. Suppose that the government were to provide free day care for children and, for the purpose of analyzing the effects of this, assume that this has no effect on the market real wage w, taxes T, and dividend income π. Determine the effects of the day care program on consumption, leisure, and hours worked for the consumer.
Answer to relevant QuestionsSuppose that a consumer cannot vary hours of work as he or she chooses. In particular, he or she must choose between working q hours and not working at all, where q > 7 0. Suppose that dividend income is zero, and that the ...Suppose a firm has a production function given by Y = zK0.3 N0.7.(a) If z = 1 and K = 1, graph the production function. Is the marginal product of labor positive and diminishing?(b) Now, graph the production function when z ...Suppose that the representative consumer's preferences change, in that his or her marginal rate of substitution of leisure for consumption increases for any quantities of consumption and leisure.(a) Explain what this change ...Suppose the government's goal is to reduce the unemployment rate. Some legislators propose that the government should give a subsidy s to any firm that hires a worker. Some other legislators argue that it would be more ...Modify the Solow growth model by including government spending as follows. The government purchases G units of consumption goods in the current period, where G = gN and g is a positive constant. The government finances its ...
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