2. (labour market equilibrium) A representative household has a utility function U(0,1) = vc + Vī, where c denotes consu

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2 Labour Market Equilibrium A Representative Household Has A Utility Function U 0 1 Vc Vi Where C Denotes Consu 1 (64.26 KiB) Viewed 61 times

2. (labour market equilibrium) A representative household has a utility function U(0,1) = vc + Vī, where c denotes consumption and 1 – free time. The total amount of HH time 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 labour (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) = In L. a. Derive the labor supply curve LS(w) and its sign with respect to w. b. Derive the labor demand curve L'(w) and its sign with respect to w. C. Calculate wage and employment in equilibrium for I = 2. d. What would happen in this market if w = 2?