Question: Please help me with below question. Assume that output (Y) in the economy is given by a Cobb-Douglas production function, Y = zKaN1-a where z

Please help me with below question.

Please help me with below question. Assume that output (Y) in theeconomy is given by a Cobb-Douglas production function, Y = zKaN1-a where

Assume that output (Y) in the economy is given by a Cobb-Douglas production function, Y = zKaN1-a where z represents total factor productivity, K is the fixed capital stock, and N is labor. Utility is given by U = In(C) + blnl, b > 0 where C is consumption, and 1 denotes leisure. Government collects taxes by taxing the firm's revenue at a flat rate of t. (After-tax revenue for the firm is (1 - t) Y). The government uses the tax to fund its expenditure G = tY, and consumers do not value G. Assume that initially G = tY = G1c) Return to the household problem. Assume that G = tY increases, this change causes a reduction of wage rate from W1 to wz, and a reduction of corporate prots from :11 to n2. Write the new equation for the new household budget constraint, solved for C. Illustrate the household's choice between C and leisure on a graph of the household's optimization problem, explaining income and substitution effects and labeling everything. Denote the new optimal values of consumption and leisure with subscript 2 ( 2 ), and the old optimal values of consumption and leisure with subscript 1 ( 1 ). (20 points)

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