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 CUITS ar answer aneren hanm pally. pa (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.

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 CUITS ar answer aneren hanm pally. pa (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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

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: h¹+p U(C,h) = c-B- where ß> 0 and p > 0 are parameters. 1+ p (d) Suppose the income tax rate is initially zero (i.e. T = 0). Calculate the consumer's utility at their utility maximizing consumption and labour supply bundle. (f) Calculate the change in the consumer's surplus (i.e. utility) following the tax change. i) Now suppose that p = 1…
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: U(C,h) = c-B- where ß> 0 and p > 0 are parameters. ‚h¹- P 1+ p a) What is this consumer's budget constraint? b) Solve for the consumer's utility maximizing hours of work h*(w, 1-T) and consumption c* (w, 1 - T, Y). c) What is the compensated own-price elasticity for the supply of hours of work? For parts (d) - (h), assume the following: w = $50,…
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: h¹. P U(C,h) = c-B- where ß> 0 and p > 0 are parameters. 1+ p a) What is this consumer's budget constraint? b) Solve for the consumer's utility maximizing hours of work h*(w, 1-T) and consumption c* (w, 1-T, Y). c) What is the compensated own-price elasticity for the supply of hours of work?
Consider an economy with two goods, consumption c and leisure l, 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 l = 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 It hours of work can be represented by the utility function U(c, h) = c- (a) What is this consumer's budget constraint? (b) Solve for the consumer's utility maximizing hours of work h*(w, 1 - T, Y) and con- sumption c*(w, 1 - T, Y). (c) Repeat part (b) for a consumer with the utility function U(c, h) = alog(c) - Blog(h).
George enjoys bananas and leisure. He sleeps 8 hours per day. Of the remaining 16 hours, for each hour he works he is paid 2 bananas. He also receives 6 bananas in dividends but has to pay 6 bananas in taxes. Draw George’s budget constraint (put consumption on the vertical axis and leisure on the horizontal). Make sure to show the vertical and horizontal intercepts as well as the slope. Now suppose that George chooses to work 6 hours per day. Find how many hours o f leisure and how many bananas he will consume, and show his optimal choice on the budget line using an indifference curve. Suppose that the government uses some of the taxes to give back to George income assistance of 4 bananas. Show the impact of the measure on George’s budget constraint Use an indifference curve to show George’s new optimal allocation and explain what will happen to his consumption of bananas and leisure if both are normal goods. The graphs below shows the behaviour of consumption of durables and…
O See Hint A consumer faces a tradeoff between labor (L) and leisure (R). She consumes a composite good (C). When the consumer works, she earns an hourly wage of $20.00, and she spends a maximum of 24 hours on labor and leisure, but she chooses to work 7.00 hours. Whatever time she does not spend working, she spends on leisure. She starts with an initial endowment of 21.00 units of the composite good, which she can buy and sell freely at a market price of $9.00. Given this information, what is the consumer's real wage? * $ 15.56
22. Taro's utility function is U(C, R) = 32√√R+C, where R is the amount of leisure. He has 16 hours a day to divide between work and leisure. He gets $10 an hour no matter how many hours he works, but must pay a 20% tax on his labor income. He has also an income of $40 from non-labor income source. How many hours will he choose to work? A) 4 B) 8 C) 10 D) 12 E) 16
Suppose that a person has 2000 hours to allocate each year between leisure and work. a. Derive the equation of his budget constraint given an hourly wage of $(15)/hour. b) Graph his budget constraint line based on the equation you derived in part a. (Consumption (C) on the vertical axis and leisure (L) on the horizontal axis). Please make sure to include the value for the vertical and horizontal intercepts. c) Now suppose that the local government introduces an income guarantee program for single parents in which the income transfer is $10,000 per year if an individual does not work during that year (this dollar amount represents the benefit guarantee). If the individual decides to work, this transfer program imposes a 100% benefit reduction rate (e. g.. each additional hourly wage earned is reduced by 100%). Derive the new budget constraint equation that corresponds to this scenario. d) Draw the budget line that corresponds to the new scenario on a new graph. (Consumption (C) on the…
An individual’s utility function is given by where is the amount of leisure measured in hours per week and is income earned measured in cedis per week. Determine the value of the marginal utilities, when = 138 and = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?
7. An individual's utility function is given by U =1000x, +450x, +5 x,x, -2x - x where x, is the amount of leisure measured in hours per week and x, is income earned measured in cedis per week. Determine the value of the marginal utilities, when x, = 138 and x, = 500. Hence estimate the change in utility if the individual works for an extra hour, which increases earned income by GH¢15 per week. Does the law of diminishing utility hold for this function?
For this question, assume that indifference curves are strictly convex, consumption andleisure are normal goods, and the optimal amounts of consumption, leisure, and labor arealways positive. A wage increase ______. (SE = substitution effect; IE = income effect)(a) increases labor supply via the SE and decreases labor supply via the IE(b) decreases labor supply via the SE and decreases labor supply via the IE(c) increases labor supply via the SE and increases labor supply via the IE(d) decreases labor supply via the SE and increases labor supply via the IE(e) Can’t tell without knowing the utility function
Kimo is a parent who has $200 in non-labor income. Kimo can earn $10 per hour working between 0 and 60 hours in a week if he works. Draw and label clearly the potential income constraint diagram faced by Kimo What is the slope of the budget constraint