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intmicro_problemset_2

intmicro_problemset_2 - Problem Set 2 Due February 24-25...

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Problem Set 2 Due: February 24-25 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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intmicro_problemset_2 - Problem Set 2 Due February 24-25...

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