Answer Happy

1. (labour market equilibrium and unemployment) A representative household has a utility function U(c,l) = a ln(c) + (1 - a) ln(l), where denotes the amount of consumption and 1 - free time. The total amount of time for GD is ī, the unit wage is w and consumption can be financed only by income from work. A representative enterprise produces the final good using only labor (the capital stock is constant and does not enter into the optimization problem of the enterprise) having at its disposal the production technology: Y = F(L) = 2L2 = a. Using the Lagrange multiplier method, calculate the labor supply curve L$(w) and determine in what direction it depends on w. Calculate consumer demand as well. b. Derive the labor demand curve LP(w) and its sign with respect to w. Derive wage and employment in equilibrium if I = 24 and a = d. What would happen to this market if the wage was w = ? Determine and draw the scale of market imbalances (i.e. unemployment rate). c.