Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L = [0, 1], and receives income w(1 - L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. Solution: The problem is
Q: Consider the following OLS regression results, In(inc)=1.970+.083educ, R2=.186, where inc represents…
A: Given Estimated regression equation: ln(inc)=1.970+0.083 educ R2=0.186 Here inc represents the…
Q: In 1980, in response to the Soviet invasion of Afghanistan, President Jimmy Carter imposed a grain…
A: As per student demand I have done answering it within 100 words in the step of 2. Please follow in…
Q: Samantha retired from the fire department. She started working an hour or two a day at a paid job in…
A: When talking about employment, it can be said that an individual who lies in the working age…
Q: When each person specializes in production of the good or service for which he or she has a…
A: The gains from specialization and trade are based not on absolute advantage but on comparative…
Q: Explain the consequences of both too low and too high a growth rate?
A: We know that Economic growth refers to the increasing production activities in a country over a…
Q: ompute the missing positive differential value * Reference Value 100 80 41 Positive Differential…
A: Positive Differentiation Value refers to the monetary value that an opportunity creates for the…
Q: Imagine there is an outbreak of 'mad sheep' disease, which wipes out a considerable portion of the…
A: a) Two factors occur when the price of haggis rises that will influence how many (units) of haggis…
Q: In Autarka 2 amusement parks, Alfonso's wonderland and Bernice's rides there are 9600 people who…
A: Let, the price of admission at Alfonso's Wonderland be = $PA. The price of admission at Bernice's…
Q: 4. Analyzing the effects of a trade deficit You have just been hired by the U.S. government to…
A: When a nation's imports exceed its exports over a given time frame, a trade deficit results. It is…
Q: Why does SMC curve cut AVC curve at the minimum point of AVC curve?
A: The change in total cost per unit of change in output is known as short-run marginal cost (SMC).…
Q: Exhibit: The Market for Chocolate-Covered Peanuts Quantity Supplied (per bag) (bags per month) (bags…
A: The shortage occurs if the quantity demanded is greater than the quantity supplied. Shortage =…
Q: A U.S. Congressperson wants to reduce the U.S. trade deficit by imposing tariffs on imports. Use a…
A: The IS-LM model is the Keynesian macroeconomic model which states the relationship between market…
Q: The total costs for a company are given by C(x) = 2100 +90x+x² and the total revenues are given by…
A: Total revenue is the total receipts a seller can obtain from selling goods or services to buyers. It…
Q: Table 1 contains price and quantity information for two products produced by Apple, the iPhone and…
A: Nominal gross domestic product (GDP) is calculated as the value of all the final items and services…
Q: One application of structural unemployment is to a mismatch of skills: employers search for workers…
A: Firms and individuals are unable to change their skill requirements or skill sets in the short term.…
Q: Give four (4) economic activities that generate both positive and negative externalities?
A: We know that An externality is a positive or negative side effect of production or consumption in…
Q: Suppose the base year for this price index is 2019. In the last row of the table, calculate and…
A: The price index is a computation that provides the rate of changes that occurred in the cost of…
Q: Amir is a risk averse decision-maker with von Neumann-Morgenstern utility u(x) that is strictly…
A: As per the given information A utility function is strictly increasing and continuous. That means…
Q: An increase in interest rates by the Federal Reserve is an example of _______ policy. Multiple…
A: The Federal Reserve advances the safety and sufficiency of individual financial institutions and…
Q: how can tariffs encourage domestic production growth?
A: Trade restrictions are any of the many policy tools that the government uses to limit the volume of…
Q: An economy can experience economic growth with no inflation if _______. A. it does not…
A: An economy can grow without the inflation when there is enhancement in productivity due to…
Q: Assume a competitive firm faces a market price of $120, a cost curve of: C = 13q3 + 20q +…
A: We have, Market price = $120 cost curve of: C = 13q3 + 20q + 500, The marginal cost of: MC =…
Q: Suppose that a price p and demand x are related through the price-demand equation x + 400p = 8,000.…
A: Elasticity of demand measures the responsiveness of quantity demanded to changes in price.
Q: firm produces 220 units of a good which cost an average of £8.25 each to produce and sells them at a…
A: Introduction: Total Revenue: the total revenue of a firm is the revenue that remains after…
Q: We live in a world where computers and other items of technology seem to get ever cheaper to…
A: The AD AS or aggregate demand aggregate supply model is a macroeconomic model that explains price…
Q: MacBook computer sells 1.25 million units at $1000 each. Price is reduced to $800. sales increase to…
A: Elasticity of demand measures the change in quantity due to change in price. The demand is elastic…
Q: The scatter chart below displays the residuals verses the dependent variable, t. Which of the…
A: The Scatter chart represents the relationship between two variables.
Q: ABC Company negotiates a 1% credit card discount. If a customer charges $1,000 on his VISA credit…
A: Given The discount rate on the credit card is 1% This means the company receives 99% of the…
Q: For an individual the Marginal Rate of Substitution is constant and equal to 1/2 for all…
A: The amount of one product that a customer may give up in exchange for more units of another good…
Q: Apple sells 6.5 million AirPods at $149 each. Apple reduces the price to $120 and unit sales volume…
A: given that, volume increases from 6.5 million AirPods to 8.45 million AirPods price reduces from…
Q: Rent (per month) Market rent = $1,500- Cent control = $1,000 100 120 E 140 160 180 4.51 Tops 525L…
A: Introduction Price elasticity of demand tells how much price is responsive to demand whereas price…
Q: ln October 2015, in an unexpected move, global technology giant Google lnc (Google) restructured…
A: Introduction ln October 2015, in an unexpected move, global technology giant Google lnc (Google)…
Q: uppose that you know the following information about the economy. The rate of change of the…
A: Given Rate of change of velocity growth rate =0.5% per year Real GDP growth rate =1% per year Money…
Q: classify the following as macroeconomics or micro economics and provide a justification for your…
A: “Since you have posted a question with multiple subparts, we will solve the first three sub-parts…
Q: SOLVE IT USING A. Rate of Return on Additional Investment MethodB. Annual Cost Method
A: Given:
Q: 4. Consider the Cash Flow diagram (Figure 2) where money is deposited in Riyadh Bank for 5 years.…
A: A cash flow series with an arithmetic gradient is one in which the cash flow either rises or falls…
Q: 1. What makes economic globalization distinct from internalization? Justify. 2. What are the 2 most…
A: "Since you have asked multiple question,we will solve first question for you.If you want specific…
Q: Variable costs are Multiple Choice O O O costs that remain to be paid even if the firm shuts down…
A: The costs that are related to the manufacturing of the items are known as variable costs, and the…
Q: Table 1 contains price and quantity information for two products produced by Apple, the iPhone and…
A: A key indicator of how well or poorly an economy is performing is the GDP, or gross domestic…
Q: In 2006, the market interest rate was 12% and the inflation rate is expected to be 10%. Calculate…
A: Fisher equation explains the relationship between the nominal interest rate and the real interest…
Q: a. Consider the aggregate production function below, where point A indicates current GDP per worker,…
A: Neoclassical theory of growth - Developed by Robert so low and JE Meade The model considers two…
Q: 6. Mark spends all of his monthly income on interstate phone calls and food. His monthly income is…
A: Here we are given consumer's budget which includes his income and the prices of food and phone calls…
Q: The primary force encouraging the entry of new firms into a purely competitive industry is Multiple…
A: An industry is purely competitive when there are large number of firms producing identical goods in…
Q: A consumer currently spends a given budget on two goods, X and Y, in such quantities that the…
A: Utility maximization is the idea that individuals and organizations seek to achieve the highest…
Q: Which of the ff. statements will cause the supply of rice to shift to the right? A. More farmers…
A: The supply curve shifts when the determinants of supply change except for the price of the good. The…
Q: Which of the following is NOT correct with regard to revenue? A. Total revenue decreases when…
A: Revenue is the income seller received by selling the output at given price level. 1. In different…
Q: examine the determinants of interest rates in developed and developing economies
A: We have show that the interest rate is the price the lender charges the borrower for using the…
Q: Currently the market for domestic air travel in OzLand is a monopoly with Qanwings as the supplier.…
A: Supply is a upward sloping curve and demand is a downward sloping curve and the interaction of this…
Q: Refer to the information provided in Table 1 below. What is the unemployment rate?
A: What is unemployment rate?
Q: Mac-book air sales are 1.6 million units at $1499.  Apple raises the price by 10%. sales decrease…
A: Given that, Mac book sales - 1.6 Million Units at $1499 Apple Price rises - 10% Mac book sales…
Step by step
Solved in 3 steps with 2 images
- Consider a worker who consumes one good and has a preference for leisure. She maximizes the utility function u(x, L) = xL, where a represents consumption of the good and L represents leisure. Suppose that this worker can choose any L = [0, 1], and receives income w(1 L); w represents the wage rate. Let p denote the price of the consumption good. In addition to her wage income, the worker also has a fixed income of y ≥ 0. (a) Write down the utility maximization problem for this consumer. (b) Find the Marshallian demands for the consumption good and leisure. (c) Find the indirect utility as a function of p, w, and y.An individual derives utility from consumption spending C and leisurel according to the following utility function: U(C,1)=C"1¹-a where 0>x>1. Leisure time in hours is given by: 1=T-H where I is hours of total time available and H is hours of work. The consumer's real income is given by: C=w (T-1)+N where w is real wage and N is real non-labour income. c) What does the Lagrangian multiplier represent in this context? IAn individual derives utility from consumption spending C and leisurel according to the following utility function: U(C,1)=C"1¹-a where 0>a>1. Leisure time in hours is given by: 1=T-H where T is hours of total time available and H is hours of work. The consumer's real income is given by: C=w (T-1)+N where w is real wage and N is real non-labour income. d) Verify that the second-order conditions for a constrained maximum are met. Reduce your answer (which should only be function a, w, N, and T) to the lowest terms.
- Consider an economy with two periods (interpreted as “when young” and “when old” periods)and two consumers, Gillian Davis and Joana Wolinsky. Gillian is a star ballet dancer with a lifetime income given by ωG= (400,0). Joana is an Econ Ph.D. student with incomeωJ= (0,400). Gillian and Joana have identical utility functions given by Ui(x1,x2) = 6 lnx1+ 3 lnx2 for i=G, J a) Plot an Edgeworth box and mark the initial endowment point. b) Write the general definition of Pareto efficient allocation (one sentence) and give the equivalent condition in terms of MRS (give formula). Check if this condition is satisfied for initial endowments. c) Derive the contract curve (write down the appropriate conditions and solve for the curve) and depict it in the Edgeworth box. d) Suppose Gillian and Joana can “trade” consumption in both periods at pricesp1,p2. Find the competitive equilibrium (6 numbers) and depict the equilibrium allocation in the Edgeworth box. e) Using the MRS condition from part b),…Sanna lives for two time periods. She receives income in both and can consume in both. Her utility function is increasing in both period 1 and period 2 consumption. Any income saved from Period 1 must be consumed in Period 2 and earns interest (at interest rate r); in contrast, if Sanna borrows in Period 1 she must pay this back (at interest rate r) from her income in Period 2. Suppose that initially Sanna's optimal bundle makes her a lender in Period 1. If the interest rate increases, which of the following is true? O None of the other answers are correct Sanna might become a borrower and will be made better off Sanna might become a borrower and might be made better off OSanna will remain a lender and will be made better off Sanna will remain a lender but might be made worse offAssume Lorena derives utility from consumption and leisure. Through the following utility function. U=VC-R where C is consumption and R is hours of leisure consumed per day (there are 24 hours in her day). Let w be the wage rate and H be the hours of work chosen. The price of consumption goods, C, is $1. In addition, assume Lorena has $M amount of non- wage income each day. Set up the utility maximizing Lagrangian needed to maximize utility subject to the budget constraint but do not solve for the demand for C and R. a b. Draw the consumer choice model for this situation (fully label the graph). Use it to graphically derive/describe/explain her labor supply function and explain what would be true for her labor supply to rise or fall when the wage rises (you may want to draw the graph twice. Measure and explain the loss in consumer surplus using the concept of compensating variation. g. h. What is the expenditure-price elasticity equation for y? That is, the elasticity for the % change…
- An individual derives utility from consumption spending C and leisurel according to the following utility function: U(C,1)=C 1¹-a where 0>a>1. Leisure time in hours is given by: 1=T-H where T is hours of total time available and H is hours of work. The consumer's real income is given by: C=w (T-1)+N where w is real wage and N is real non-labour income. b) In which situation would the individual's supply of hours of work be independent of the hourly wage rate w?Susan obtains utility by consuming carrots C and enjoying leisure L. Suppose that she has a daily non-wage income Y of £100 and is paid a fixed hourly wage rate of £10 for every hour she works in a local coffee shop. Assume that Susan is a utility maximiser and is free to choose x hours of work per day where 0 ≤ x ≤ 10. Assume also that the unit price of C is £1. a) Suppose that L is measured on the horizontal axis and C on the vertical axis. Use these axes to draw the set of all C and L combinations that Susan can choose from. Write down Susan’s budget equation. b) Suppose that Susan’s preferences over carrots and leisure are expressed by the following utility function: U(C,L) = min{C, 10L}. Calculate Susan’s optimal consumption bundle, both algebraically and graphically. Calculate the value of MRS at the optimal choice. c) Suppose instead that Susan’s preferences are such that indifference curves in the L-C space are strictly convex to the origin, and that she chooses to work 5…An individual values both consumption and leisure. Suppose the individual has 1600 hours per week they can allocate between leisure and work. IF the individual works, they make a wage of $25 per hour. The individual's utility function is given as a function of leisure time, L and consumption, c: U(L, c) = L^(1/2)c ^ (1/2) a) Draw the individual's budget constraint for leisure and consumption. b) How much leisure time will the individual have when utility maximizing? c) Consider a Universal Basic Income policy like the one proposed by Andrew Yang that would give all individuals a lump -sum, unconditional cash transfer of $1,000 each month. How much leisure time will the individual have when utility maximizing with the cash transfer? d) Now suppose, instead of a cash transfer, a minimum wage of $40 per hour is implemented. How much leisure time will the individual have when utility maximizing with the cash transfer? e) What change in leisure time can be attributed to the substitution…
- Suppose Jack lives for two periods. Period one is his working life, during which he earns income $50,000; period two is his retirement, during which he earns nothing. During retirement he consumes from the savings during his working life. The rate of interest on his savings is 10%. His consumption during his working life is Cw, and his consumption during his retirement life is Cr. Assume that Jack's utility function is a standard utility function exhibiting diminishing marginal rate of substitution between Cw and Cr. His current consumption during the working life is 75% of his earned income. a. Using the intertemporal choice model, draw a well labeled graph that details all the information discussed above. Notably, indicate the slope of the budget constraint, the intercepts of the budget constraint on both axes, the value of current and future consumptions, and the current savings. Keep in mind that no tax has been imposed on the saver, yet. b. Now the government taxes interest…The consumer's utility function for Consumption (C) and Leisure (L) is given as U(C,L) = √CLHis hourly wage is $10, non-labor income is $20; and he has a total of 16 hours to allocate between labor and leisureBased on this information, the consumer's total utility at the optimal level (or optimal C,L combination) is:a. 57.0 utilsb. 28.5 utilsc. 99.75 utilsd. 114.5 utilse. Cannot be determined with the information given I prefer typed answers.Consider an economy with two goods, consumption c and leisure I, and a representative consumer. The consumer is endowed with 24 hours of time in a day. A consumer's daily leisure hours are equal to 1 = 24 - h where h is the number of hours a day the consumer chooses to work. The price of consumption p is equal to 1 and the consumer's hourly wage is w. The consumer faces an ad valorem tax on their earnings of T percent. The consumer also receives some exogenous income Y that does not depend on how many hours she works (e.g. an inheritance). The consumer's preferences over consumption and hours of work can be represented by the utility function: h'+p U(C,h) = c-B- 1+ p where ß> 0 and p > 0 are parameters. TENTO COITS ar answer aneren ananm pally. p (j) Suppose instead that the consumer's utility function was U(c, h) = min(c, -h). Would the EB from a unit excise tax be larger or smaller compared with the original utility function. Explain your answer in 4 sentences.