2 John has 24 hours in his day (T = 24) which he can devote to working and earning income or to leisure (including sleep

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2 John Has 24 Hours In His Day T 24 Which He Can Devote To Working And Earning Income Or To Leisure Including Sleep 1 (28 KiB) Viewed 41 times

2 John has 24 hours in his day (T = 24) which he can devote to working and earning income or to leisure (including sleep). The wage rate is w and he has no other source of income so he consumes R = wL if he works I hours. His utility function is given by u(R,h) = where John devotes h=1 - L hours to leisure and L hours to work. (1) Calculate his labour supply curve. (ii) Calculate the elasticity of his supply with respect to the wage. Is the income or substitution effect dominant? (ii) Suppose now that John receives non-labour income of m > 0. How does that change his labour supply decision and how does it change the shape of his labour supply curve?