The picture in this exercise describes an economy that is experiencing a boom in total factor productivity z. The economy, after the boom, has reached point B. Point A is the evaluation of the substitution effect induced by the total factor productivity boom. What can you say about the consumption and leisure levels in the economy BEFORE the productivity boom? Select a point on the original indifference curve (purple curve) where consumption (and leisure) may have been before the productivity boom.
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- The picture in this exercise describes an economy that is experiencing a boom in the level of capital K. The economy, after the boom, has reached point B. Point A is the evaluation of the substitution effect induced by the capital boom. What can you say about the consumption and leisure levels in the economy BEFORE the boom? Select a point on the original indifference curve (purple curve) where consumption (and leisure) may have been before the boom. A w** h-l Selected Coordinates ClearJoe won $365,000 a year for life in the state lottery ($1000 per day for life). Use a labor-leisurechoice analysis to answer the following questions:a. Show how Joe’s lottery winnings affect the position of his budget line.[Hint: think about the two things Joe “purchases”, goods (G) and relaxation (R).Assume the price of goods is PG (you can assume this is equal to one if that makes themath easier for you) and the “price” of leisure is Joe’s foregone wage (w). It’s alsoeasiest if you think of this in the context of his daily budget constraint.]b. Joe’s utility function for goods per day (G) and hours of leisure (relaxation) per day (R) isU = G + 240R1/2. After winning the lottery, does Joe continue to work the same numberof hours each day? What is the income effect of Joe’s lottery gains on the amount ofgoods he buys per day?Using Fisher's Intertemporal Choice model, consider the following scenario: Suppose Milo earns $1,750 in the first period and $2,500 in the second period. If he consumes $1,200 in the first period and $1,550 in the second period, what is the interest rate? Now if Milo’s consumption changes to $1,800 in the first period and $2,000 in the second period, what is the new interest rate?
- Consider an individual who receives utility from consumption, c, and leisure, l. The individual has L time to allocate to work, n, and leisure. The individual’s consumption is a function of how much he works. In particular, c = root n. The individual’s maximization problem is max U =ln(c)+θl subject to c = √n n+l=L where θ > 0. Solve the maximization problem. Hint: Substitute both constraints into the objective function.1. The chapter uses the Fisher model to discuss a change in the interest rate for a consumer who saves some of his first-period income. Suppose, instead, that the consumer is a borrower. How does that alter the analysis? Discuss the income and substitution effects on consumption in both periods.Moe and Curly both face the same budget line for consumption and leisure. At every possible consumption-leisure bundle on the budget line, Curly always requires marginally more leisure than does Moe in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph the indifference curves for Moe and Curly that shows the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result?
- Consider the figure to the right, where a consumer initially maximizes utility at consumption-leisure combination R along budget constraint L'. Suppose the wage rate doubles. 1.) Use the line drawing tool to draw the new budget constraint with the higher wage. Label this line 2, 2.) Use the point drawing tool to plot the new utility-maximizing combination of consumption and leisure. Label this point 'T'. Carefully follow the instructions above, and only draw the required objects. As the wage increases, the hours worked by the individual In this case, leisure is fall / rise / stay the same a normal/ an inferior good. Income (Market value of goods) per day 2407 220- 200 180 160- 140 120- 100- 80- 60- (L¹ 20- 0- 2 R -NWA 6 8 10 12 14 16 18 20 22 24 26 Leisure hours per day O 0 NAkua gets a research grant and her income increases to GHS 800 per month. What is the new equation of her budget line? What if income stays constant at GHS 400 and the price of Yoghurts increase to GHS10?If a parallel shift rightwards of the budget constraint makes the household work more, then which of the assumptions is violated: Households prefer more to less. Consumption and leisure are normal goods. None is being violated. The consumer likes diversity in his or her consumption bundle.
- Marley has 100 hours per week available she can spend either working or doing leisure activities. He can work at a wage rate of $50 per hour. Bob receives $1000 of rental income per week, no matter how much he works. Use leisure-income model to solve this:- i) draw Marley budget line and optimal choice of working 80 hours in a week then calculate the maximum and optimal amount of income ii.) And suppose Marley is suppose to share the household expenses and then be taxed 50% of her wage income. then draw another diagram to compare Marley choice in Part i) and the new labour supply decision of working 90 hours per week due to the tax. Clearly label out the income effect, substitution effect and total effect in the diagram.Economics u (x₁, x₂) = x²x² If the price of good 1 is $6/unit, the price of good 2 is $8/unit, and income = $118... What is this person's optimal consumption level for good 1?Consider a worker who earns $20/hour in the labor market and receives $50 per week in non-labor income. Assume the total number of hours available for work (h) and leisure (L) is 168 hours per week (i.e., ? = 168 = ℎ + ?). What is the maximum value of consumption that this individual could achieve in a week? [i need this answer 4 upvotes]