Show that the budget constraint can be rewrien in real terms (in terms of good sinstead of currency) as C + w` =wh + ? ? T. Download attachments for a (same) complete question
Imagine a representative household with the following utility function: u(C, `) = ? ln (C) + (1 ? ?) ln (`),
where 0 < ? < 1, and C represents consumption of a consumption good (or basket), while ` represents
hours of leisure.
(a) Find the marginal rate of substitution at some arbitrary point, (C, `).
(b) We considered three assumptions that consumer?s preferences must satisfy. Check whether this
utility function satis€es the €rst two assumptions (namely, more is be€er and a taste for diversity) or not.
(c) Does this utility function satisfy the Inada conditions? €is representative household has a budget
constraint that looks like C =wNs + ? ? T, where w represents the real wages, Ns the amount of hours
worked, T the lump-sum taxes government imposes, and ? the pro€ts of a representative €rm which the
representative household owns. Finally, the representative household has a total amount of h hours that
she can allocate to working or enjoying leisure time; that is ` + N s =h. For the rest of this problem,
suppose T < ?.
(d) Show that the budget constraint can be rewri€en in real terms (in terms of goods instead of currency)
as C + w` =wh + ? ? T.
(e) Draw the budget constraint in real terms and mark every important element in it.
(f) Write the maximization problem of the household. (Do not forget to identify the domain of the utility
function, or non-negativity constraints.)
(g) Suppose that ? = 1 4 , h = 30, ? = 30, and T = 10. Solve the maximization problem of the
representative household. Make sure to argue whether the boundary points can or cannot be the
optima. What will be the optimal level of consumption, leisure, and labor, as functions of real wage, w?
(h) Are leisure and consumption good normal or inferior goods?
This question was answered on: Dec 18, 2020
Buy this answer for only: $18.50
This attachment is locked
We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Dec 18, 2020EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.