Raymond consumes leisure (L hours per day) and other goods (Y units per day), with preferences described

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Raymond consumes leisure (L hours per day) and other goods (Y units per day), with preferences described by U(L,Y ) L + 2 √Y . The associated marginal utilities are MUY = 1 and MU= 1/L. The price of other goods is 1 euro per unit. The wage rate is w euros per hour.
a) Show how the number of units of leisure Raymond chooses depends on the wage rate.
b) How does Raymond’s daily income depend on the wage rate?
c) Does Raymond work more when the wage rate rises?

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Microeconomics

ISBN: 9781119554844

6th Edition

Authors: David Besanko, Ronald Braeutigam

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