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Question 4. Suppose a consumer's preference is described by the following utility function U(C, 1) = 2C + 541/2, where C
Posted: Thu May 19, 2022 10:09 am
by answerhappygod
- Question 4 Suppose A Consumer S Preference Is Described By The Following Utility Function U C 1 2c 541 2 Where C 1 (53.95 KiB) Viewed 62 times
Question 4. Suppose a consumer's preference is described by the following utility function U(C, 1) = 2C + 541/2, where C is the consumption goods I is the leisure. The total available time h is 1, and the market's real wage is w. The production function is given by Y =zK1/2(N0)4/2, where z = 1 and K = 1. For simplicity, let us assume that there is no government, G = 0. The firm distributes a profit it to the consumer. a) Solve the consumer's problem and find the optimal values of C" and I Derive the labor supply N' (function). b) Solve the firm's problem and derive ND. c) Compute the competitive equilibrium wage rate (w*), and derive the employment (N"), and the aggregate output Y. d) Compute the equilibrium profit #t and C. Is the income-expenditure identity satisfied?