Household production, Macroeconomics

Assume two individuals, A and B, are considering marriage, and each face the same amount of hours a week to be split between market-labor and home-labor.  Assume that A can make $20 of market goods per week and $10 household goods per week; assume B can make $10 of market goods per week and $20 of household goods per week. Graphically depict a situation where, upon marriage, B specializes in the production of one good and A splits their time between market and home labor. (Clearly identify the intercepts and kink in their collective production possibilities curve.)

Assume A is a man and B is a woman. We know that the participation rates for men have been decreasing, while at the same time they have increased for women over the 20th C. Assume that the household starts with each individual specializing in the production of different goods. Graphical depict how an increase in the market-labor wage of B could increase her supply of labor (to the market) and at the same time decreases the supply of labor (to the market) for men.

Assume that A and B, upon marriage, specialize in the production of different goods. Consider the possibility that there is effectively no difference between people's productivity when it comes to the production of household goods. Graph their collective PPF using the values in (a) except that maximum amount of household goods produced by each is 10 units.

Assume that, with the values in (a), A and B specialize in the production of different goods upon marriage. Draw two graphs. The first graph shows a bilateral increase in wage inequality (steeper PPF for A and shallower PPF for B), specialization in different goods, but the household has lower utility than if there was specialization in (a).

Posted Date: 2/23/2013 4:53:26 AM | Location : United States







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