Question: Please provide a solution to the following A. Suppose the representative individual chooses to work x hours at her work-leisure optimum. Assume no taxes. 1.

Please provide a solution to the following

A. Suppose the representative individual chooses to work x hours at her work-leisure optimum. Assume no taxes.

1. Suppose a higher overtime wage for hours beyond x becomes available to the individual. Which of the following are possible optimal outcomes? Explain your choice fully and rank them in terms of utility.

(i). The individual works more than x hours.

(ii). The individual stops working.

(iii). The individual does not stop working but works less than x hours.

2. Suppose the representative individual enjoys an increase in her non-labour income but faces a single wage for all hours of work. Which of the following outcomes are possible when leisure and consumption are normal?

(i) The individual stops working.

(ii) The individual works but less than x hours.

(iii) The individual works more than x hours.

B. If an individual's utility function is of the form U=Cl2 , this individual's labour supply curve must be perfectly inelastic with respect to the wage, assuming there is no government (and hence no taxes).

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!