ECON
Econ100A_PSET4

# Econ100A_PSET4 - Econ 100A Problem Set 4 Supply of Labor 1...

• Notes
• 2

This preview shows pages 1–2. Sign up to view the full content.

Econ 100A - Problem Set 4 Supply of Labor 1. Let U(L e , I) = L e 2 I. What is the individual’s labor supply function (L a (w, I 0 ))? How many hours does the individual work if the wage (w) is 10\$/hr and non-wage income (I 0 ) is 320\$/wk? 2. Illustrate the income and substitution effects of a rise in a consumer’s wage, w, upon their labor supply. 3. Using one budget line and 1 indifference curve, illustrate a case in which an individual’s wage is such that the individual chooses not to work at all. 4. Your friends (some macroeconomists) have a theory that people’s utility functions U(L e , I) for leisure and disposable income might take the linear form, U(L e , I)=L e + I. Show that they are idiots. (Hint: Try drawing a picture and think about what this theory implies as wage rates get very high.) 5. Use budget lines and indifference curves to illustrate the case where a simultaneous doubling of the wage rate and a doubling of my non-wage income would have no effect on my labor supply.

This preview has intentionally blurred sections. Sign up to view the full version.

This is the end of the preview. Sign up to access the rest of the document.
• Fall '07
• Babcock
• Utility, indifference curves, budget lines

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern