1. Your preferences are summarized by the utility function U ( N , Y ) = N*Y3 where Y is a composite good and N is the number of leisure hours you consume each day. Thus, 24-N =L where L is the number of labor hours supplied each day. Also assume that you have some non-wage income Io a. Given that the price of Y is PY and your nominal wage (in $ / hour) is w derive your optimal demands for leisure and the composite good: N*( . ) & Y*(. ) and therefore L*( . ). Don't forget the 24 hour constraint, and comment on whether your optimal N*, Y*, LS* make economic sense in their arguments....namely, "as w goes down, LS* ... i . Your utility-maximizing demand for leisure ( N ) here is given by the following function: a. N* = [ 24*w + Io ] * [w /PY] N* = [24*w + Io ] / [w/ Py ] C . N* = [ 24*w2 + 10 ] / PY N* = [ 24*w + 10 ]/ [4*w ] ii . Your utility-maximizing demand for the composite good ( Y ) here is given by the following function: a. Y* = 34 * [ 24*w + Io ]/PY ] b. Y* = 34 * [ 24*w + Io]/4*w ] C. Y* = 34 * [ 24*w + 10 ] d. Y* = 34* [ 24*w + 10 ]/[ 4*PY ] iii. Your optimal labor supply ( LS ) here is given by the following function: a LS = 18 -w* Io LS = 24- w* 10 C. LS = 18 - (10/4*w ) d. LS = 24- (10 / 4*w )b. Sketch your labor supply curve from (a) and comment on its shape. i. Which diagram correctly sketches the labor supplyr curve here: a. A b. B c. C cl D ii, We can infer from that sketch that whenever the wage changes and the substitution effect and the income effect on leisure are both non-zero, a. The substitution effect dominates the income effect. b. The income effect dominates the substitution effect. c. The substitution effect just balances the income effect. d. Not enough information to tell. c. Suppose the wage rate is $20ihour. What level of non-wage income will induce you NOT to work? i. At a wage rate of $20 i hour, if non-wage income is , you will maximize utility by NOT working and taking hours of leisure a. $1920 ; 12 1). $1440 ; 24 c. $1920 ; 24 {1. $1440 ; 12