hw2 - Macroeconomics Homework#2 1 Mr White is endowed with...

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Macroeconomics Homework#2 1. Mr. White is endowed with 16 hours per day to be allocated between working ( L ) and leisure ( R ). His preference over l and R is represented by the utility function ±²³ ´µ ¶ ·¸¹º»²³ ´¼ . He does not have non-labor income and all of his labor income is spent on a consumption good C . His wage rate is $10 and the price of C is $1. a. To maximize utility, how many hours should Mr. White work per day? b. If now his wage increases to $20, but only for those hours of working exceeding that in (a). How many hours should Mr. White work now? 2. Henry’s yearly time endowment is ½ hours. He can work as many hours as he chooses at a wage rate of ¾ a. Write down the budget constraint that links Henry’ hours of leisure (n) and his units of consumption (c). b. Suppose Henry’s utility function is U=96n+c ¿ n-n 2 . What is Henry’s labor supply function? [Hint: maximize utility subject to the budget constraint, and note that labor supply is ( T-n
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