(Answered) Suppose the consumerworker values two things a consumption

Economics

Suppose the consumer/worker values two things: a consumption good C and leisure L. Suppose that there are 24 hours in a day and the consumer/worker has a utility function U (C, L) = C^0.5 + L ^0.5 The price of consumption is P and the wage rate is w: You donít need any more prices.

Note that this is a conceptually difficult question with easy math. The difficulty in the problem is in setting it up correctly, conceptualizing it correctly and interpreting it correctly.

1. Write down the formula for the consumer/workerís income

2. Set up the utility maximization problem by writing the Lagrangian

3. Solve for the Marshallian Demand for L* (i:e: solve for L*)

4. Take the derivative of L* with respect to w: Is the result surprising (it should be!)?

How is this problem different from the standard utility maximization problem (hint: there is an extra effect of w here - explain what it is and how it works).

View complete question

Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M91979665
Price:- $10

Verified Expert

Priced at $20 Now at $10, Verified Solution

Have any Question?Write your Review or question?

Related Questions in Microeconomics

Question it appears that in the twenty-first century by far

Question: It appears that in the twenty-first century, by far the biggest increase in Federal spending will occur in increased medical care expenditures for the aged and the poor. If this does indeed turn out to be a pol ...

Question if the government decides to tax the consumption

Question: If the government decides to tax the consumption of cigarettes, (suppose there was not one on the market before) what will happen in the market for cigarettes? (Notice: This is a tax on CONSUMPTION not producti ...

If the price of gasoline is 4 per gallon and the price

If the price of gasoline is $4 per gallon and the price elasticity of demand is .4, how much will a 10 Percent reduction in the quantity placed on the market increase the price?

Question a domestic shoe company distributes running shoes

Question: A domestic shoe company distributes running shoes and tennis shoes for $95 per pair to it domestic shoe retailers. The marginal cost of producing a pair of running shoes is $60 and the marginal cost of producin ...

Question if you were a subsidiary manager at a

Question: If you were a subsidiary manager at a multinational, what are the lessons you can draw from "being a subsidiary manager at a multinational" that can help you successfully convince the headquarters that your ide ...

Question 1 a due to a technological boom and rapid

Question: 1 (a) Due to a technological boom and rapid expansion of the economy, the Federal Reserve Bank is pursuing a contractionary monetary policy. Using a graphical analysis, show the effects of this policy on the eq ...

Question from the work it out effects of trade barriers you

Question: From the Work It Out "Effects of Trade Barriers," you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of t ...

Question are australian households that wish to purchase

Question: Are Australian households that wish to purchase shares of stock in an American company suppliers or demanders of US dollars in the foreign exchange market? Are these same Australian households, suppliers or dem ...

Question an equipment costs 800000 and has a service-life

Question: An equipment costs $800,000 and has a service-life of 10 years with a salvage value of $20,000. The equipment will bring a before tax income of $200,000 every year. Annual operations and maintenance will be $10 ...

Question discuss ways in which you would develop a

Question: Discuss ways in which you would develop a performance measurement system for a firm that purchased a supplier of its intermediate goods. What information would you begin trying to preserve? How might you want t ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Microeconomics Expert