Marginal rate of substitution of leisure for consumption

Assignment Help Business Economics

Reference no: EM13798711

Tom gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 112 hours. His wage is $20. His utility function is U(C,L) = C^3/4*L^1/4. Tom receives 640 each week from her great-grandmother.

a. What is the marginal rate of substitution of leisure for consumption?

b. Write down the equation for this individual’s budget constraint? Graph it.

c. Solve for this individual’s optimal level of consumption, leisure, and hours of work

d. What is Tom’s reservation wage?

Reference no: EM13798711

Questions Cloud

Describe in words how to interpret the coefficient : You gather data on US workers aged 22 to 55 from the Current Population Survey. You define the Average Hourly Wage as self-reported total annual labor income divided by self-reported total annual work hours. Describe in words how to interpret the coe..

Generated by two different types of public programs : Let’s compare the incentives generated by two different types of public programs. The Aid to Families with Dependent Children (AFDC welfare before reform) provides an income subsidy, G, at 0 hours of work, it is taxed away at a rate t when an individ..

Compare life cycle path of hours of work between two workers : Consider two workers with identical preferences. Phil and Bill. Both workers have the same life cycle wage path in that they face the same wage at every age, and they know what their future wages will be. Leisure and consumption are both normal goods..

Policies are consistent with goal of increasing productivity : Which of the following policies are consistent with the goal of increasing productivity and growth in developing countries?

Marginal rate of substitution of leisure for consumption : Tom gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 112 hours. His wage is $20. His utility function is U(C,L) = C^3/4*L^1/4. Tom receives 640 each week from her great-grandmother. What is the mar..

What happens to hours of work when non-labor income decrease : What happens to hours of work when non-labor income decreases? Does such a non-labor income change generate a substitution effect? Why might we expect welfare programs create work disincentives? What happens to the probability that a particular perso..

Graphing budget constraint and incorporate taxes : Greg earns $10 per hour for work for up to 30 hours of work each week. He is paid $15 dollars per hour for every hour in excess of 30. Greg faces a 15 percent tax rate and pays 3 dollars an hour in child-care expenses for each hour he works. When gra..

What was unemployment rate-labor force participation rate : (All numbers in the thousands) In May 2015, the civilian non-institutional population was 250,455. The number of employed workers was 148,795. The number of unemployed workers was 8,674. The number not in the labor force is 92,986. What was the unemp..

User Account

All Pages