Assume the aggregate production is produced using the technology function Y = 2z√Nand the utility of the representative consumer is given by U(C, l) = ln(C). This utility function implies, in particular, that the consumer does not value leisure. Let’s assume that G = T = 0. The consumer has a total number of h hours to split between leisure and work time.
1. Write down the consumer’s budget constraint.
2. Solve the consumer’s problem and solve for the optimal C? and Ns
3. Solve the firm’s problem and derive the optimal labour demand Nd
4. Compute the equilibrium wage, consumption and employment in this economy.
5. How do these variables react to an increase in total productivity factor z?
Hint: Since the consumer doesn’t value leisure, he will optimally choose l? = 0. The MRS can not be calculated here and there is no need to use the MRS condition to solve for the optimal C? and l?
. When solving Question 4), use the definition of an equilibrium, that is, Ns = Nd.
The post Compute the equilibrium wage, consumption and employment in this economy. appeared first on Homeworkaider.
What Students Are Saying About Us
.......... Customer ID: 12*** | Rating: ⭐⭐⭐⭐⭐"Honestly, I was afraid to send my paper to you, but you proved you are a trustworthy service. My essay was done in less than a day, and I received a brilliant piece. I didn’t even believe it was my essay at first 🙂 Great job, thank you!"
.......... Customer ID: 11***| Rating: ⭐⭐⭐⭐⭐
"This company is the best there is. They saved me so many times, I cannot even keep count. Now I recommend it to all my friends, and none of them have complained about it. The writers here are excellent."
"Order a custom Paper on Similar Assignment at essayfount.com! No Plagiarism! Enjoy 20% Discount!"
