Question: Gudrun has a Constant Elasticity of Substitution utility function that leads her to have the following labor supply function: h= 1 1+w05* A. (4)

Gudrun has a Constant Elasticity of Substitution utility function that leads her

Gudrun has a Constant Elasticity of Substitution utility function that leads her to have the following labor supply function: h= 1 1+w05* A. (4) What happens to her labor supply when the wage increases? 40 2108 B. (6) What does that tell you about the relative strengths of the income and substitution effects of a wage increase on leisure?

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