· α Each week, an individual consumes x and y of two goods, and works for 1 hours. These three quantities are chosen to maximize the utility function U(x, y, 1) = a ln(x) + ß ln(y) + (1 − a − 3) ln(L − 1), which is defined for 0 ≤ 1 < L and for x, y > 0, and where a, ß> 0 and a + ß < 1. The individual faces the budget constraint px + qy wl, where w is the wage per hour. • State the optimization problem • Solve completely for the utility-maximizing levels of x, y, and I

· α Each week, an individual consumes x and y of two goods, and works for 1 hours. These three quantities are chosen to maximize the utility function U(x, y, 1) = a ln(x) + ß ln(y) + (1 − a − 3) ln(L − 1), which is defined for 0 ≤ 1 < L and for x, y > 0, and where a, ß> 0 and a + ß < 1. The individual faces the budget constraint px + qy wl, where w is the wage per hour. • State the optimization problem • Solve completely for the utility-maximizing levels of x, y, and I

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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