This preview shows page 1. Sign up to view the full content.
Unformatted text preview: c. 112 dollars per day on consumption. d. 92 dollars per day on consumption. e. 138 dollars per day on consumption. Answer: Max U(C,R) = CR (1) s.t. C+8R=40+8*18 (2) Note: this is the budget constraint. The right-hand side is the consumption, and the left-hand side is the endowment as a sum of nonlabor and labor income. from (2) C=184-8R (3) plug (3) into (1) Max (184-8R)*R FOC dU/dR = 184-16R=0 R=184/16 Plug R in (3) C=184(1-8/16) =92...
View Full Document
This note was uploaded on 01/26/2010 for the course ECONOMICS EC212 taught by Professor Yu during the Spring '08 term at Mt. Holyoke.
- Spring '08