Consider an economy where consumerrsquos utility function, Ask an Expert

Economics

Consider an economy where, consumer’s utility function is given as U(C,L)=C-(1/2)L2 . where C is consumption and L is labor. The production technology is Y=(1.6)L-(1/2)L2. The turnover cost per labor is (0.36)/(w/p)

(a) What happens to t as real wage increases? Give a clear intuition

(b) What happens to t as labor increases? Give a clear intuition

(d) Write down consumer maximization problem and solve it. Derive labor supply curve

(e) Find real wage, employment, output and unemployment in this economy.

(f) Illustrate the solution graphically using Labor Supply / Labor Demand and Production Function diagrams.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91566123

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