1. The individual's utility function has the following form: U(C, L) - 5 + CELL Here C indicates the consumption good and _ the leisure. The individual has non-labour income R and Lo hours that can be used to work (h) or leisure. P = 1 is the numeraire. (a) Derive the Marshallian labour supply h*. (b) Derive the Marshallian elasticity of labour supply with respect to wages nM. (Note: this is a function of w, h and R) (c) Derive the Hicksian labour supply h. (d) Derive the Hicksian elasticity of labour supply with respect to wages ny. (Note: this is a function of w, h and U) (e) Assuming that w = 1, R = 8 and Lo = 24: . Calculate the values of h* and h (Hint: to do so, calculate before the optimal level of expenditure and of the utility.) What do you notice? . Calculate the values of nar and ny; comment and compare the sizes of the elasticities . Verify that the Slutsky equation holds (recalling that nM = nH + RoRo)