solhw1 - Answers to HW1 Jenny's utility function is: U (C ,...

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Answers to HW1 Jenny’s utility function is: L C L C U 2 ) , ( = , Johnny’s utility function is: CL L C U = ) , ( The slope of Jenny’s indifference curve is: -C/2L; The slope of Johnny’s indifference curve is: -C/L 1). Jenny has relative stronger preference for consumption over leisure, because for Jenny, one unit decrease in consumption should be compensated by 2 units of leisure, but for Johnny, the compensation needed is only 1 unit. 2). Suppose the total endowment of time for each person per week is T=110, and L is the leisure consumed, T-L is the labor supply, C is the consumption of other goods. For Jenny, her problem is to choose L such that C/2L=W. C=300+10*(T-L)=2LW. Therefore Jenny’s choice of leisure is: L=46.7. Labor supply is T-L=110-46.7=63.3. Her labor income is: 63.3*10=633. Total income is: 933 For Johnny, his problem is to choose L such that C/L=W. C=300+10*(T-L)=LW. Johnny’s choice of leisure is: L=70. His labor supply is: T-L=40. His labor income is: 40*10=400.
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solhw1 - Answers to HW1 Jenny's utility function is: U (C ,...

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