These questions were based on an article that profiled women who were part of a book club, had high levels of education (from elite schools), married men with high earnings, and were on track for highpaying careers. They all decided to withdraw from the paid labor market after having children. These questions seek to discuss if and how the labor supply model would predict their choices to exit the labor force and/or to reduce their work hours. 

Please don't consider the calculus aspect to answer the question because all the calculation methods will be provided.

MUW = marginal utility of work, MUL = marginal utility of leisure, MUH = marginal utility of household production. Utility function -> U (L, C, G). Be mindful that upper case W = paid Work unit, lower case w = wage rate, C = consumption from market, p = price of consumption, H = unpaid home production, G = home goods and services that are produced at home, and household productivity rate = h

 Time constraint: T = W + H + L  Budget Constraint: wW = pC

G = hH, C = wW/p. Equations to find the marginal utility value for the desired variable: MUW = MUC  w/p , MUH = MUG  h.

For these questions, please use the labor/leisure model (choices of L, W) which is U(L, W)

Q. Does the labor leisure model predict that raising spousal wages will increase or decrease work hours?

a. Illustrate using marginal utility figures that show cases with high and low spousal wages that produce different participation decisions (W>0 versus W=0).

b. Illustrate using marginal utility figures that show cases with high and low spousal wages that produce different work hours (both for W>0). [These figures do not have to be exact, but they should show that they satisfy the conditions for marginal utilities and the time constraint.]

c. Provide intuition for why the marginal utility curve (or curves) will change in the way they showed.

Answer rating: 100% (QA)

Answer To answer your questions lets delve into the laborleisure model and how it applies to the scenario youve described In the laborleisure model individuals make decisions about how to allocate the... View the full answer