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Problem Set 2
Due: February 2425
Intermediate Microeconomics, Spring 2011
Prof.Gemici
Answer the questions below in as much detail as possible. Make sure you
show all calculations.
You will not be given any credit for just writing
down the answer without showing the derivations and calculations.
The solutions to this problem set are due the beginning of your Recitation
class.
1. Suppose that Priya’s preferences for leisure (L) and other goods (Y)
are given by:
U
(
L,Y
)=
√
L
+
√
Y
Also, suppose that
P
Y
= $1. Derive the equation for Priya’s supply
of labor as a function of wages. Is Priya’s supply of labor increasing
in wages, decreasing in wages, or backward bending? (Hint: First de
rive the labor supply function from the optimality conditions as usual.
This is the H(w) function. Then check whether H(w) is increasing or
decreasing in w. Or it can also be increasing for some values of w, and
decreasing for other values, in which case it will be backward bending.)
2. Consider the following production technologies. Write down the expres
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 Spring '11
 Gemici
 Microeconomics

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