Pat can earn a $20 per hour wage, and has a daily nonwage income of $50....

 

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Pat can earn a $20 per hour wage, and has a daily nonwage income of $50. Suppose that for 16 hours a day Pat is free to choose between working for a wage or spending leisure time. Suppose also that Pat is a rational person. a. Construct a model that shows Pat's optimal work - leisure choice. Describe Pat's optimum. b. Sasha faces the same choices as does Pat. However, Sasha chooses to remain out of the labor force. Construct a model that shows this. Using this model, what is Sasha's Reservation Wage? Suppose the wage rises to $50 per hour. Choose either Pat's or Sasha's model and show the change in labor supply. Be sure to identify any Substitution Effect and Income Effect. C. Pat can earn a $20 per hour wage, and has a daily nonwage income of $50. Suppose that for 16 hours a day Pat is free to choose between working for a wage or spending leisure time. Suppose also that Pat is a rational person. a. Construct a model that shows Pat's optimal work - leisure choice. Describe Pat's optimum. b. Sasha faces the same choices as does Pat. However, Sasha chooses to remain out of the labor force. Construct a model that shows this. Using this model, what is Sasha's Reservation Wage? Suppose the wage rises to $50 per hour. Choose either Pat's or Sasha's model and show the change in labor supply. Be sure to identify any Substitution Effect and Income Effect. C.