Question: Dudley's utility function is U ( C , R ) = C ( 1 2 R ) ^ 2 , where R is the amount
Dudley's utility function is UCRCR where R is the amount of leisure he has per day. He has hours a day to divide between work and leisure. He has an income of $ a day from nonlabor sources. The price of consumption goods is $ per unit. a If Dudley can work as many hours a day as he likes but gets zero wages for his labor, how many hours of leisure will he choose?b If Dudley can work as many hours a day as he wishes for a wage rate of
$ an hour, how many hours of leisure will he choose? How many hours will he work? Hint: Write down Dudley's utility subject to this constraint. Rement of leisure that maximizes his wishes to supply ine amount of labor he wis demand for leisure.c If Dudley's nonlabor income decreased to $ a day, while his wage rate remained at $ how many hours would he choose to work?Suppose that Dudley has to pay an income tax of percent on all of his income, and suppose that his beforetax wage remained at $ an hour and his beforetax nonlabor income was $ per day. How many hours would he choose to work?
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
