Consider the following labor-leisure choice model. U(C,L) = C^2/3L^1/3 C = wN + π – T H= N+ L Where C: consumption L: leisure N: hours worked H = 50 : total hours w = 4 : hourly wage π = 20 : non-labor income T = 10 : lump-sum tax Suppose the hourly wage changes to w = 5. Perform a decomposition and fill in the table C L N Substitution Effect Income Effect Total Effect

Consider the following labor-leisure choice model. U(C,L) = C^2/3L^1/3 C = wN + π – T H= N+ L Where C: consumption L: leisure N: hours worked H = 50 : total hours w = 4 : hourly wage π = 20 : non-labor income T = 10 : lump-sum tax Suppose the hourly wage changes to w = 5. Perform a decomposition and fill in the table C L N Substitution Effect Income Effect Total Effect

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.2P

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