intermediate macroeconomics help

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Question description

1. Suppose that the representative consumer in chapter 4 has the following

consumption and labour supply functions:

C =1456 w/1 + 9/w,

 Ns = 1456 −13104/9 + w

Further assume that the consumer’s total time endowment is h = 1456.

(a) Calculate the value of consumption, labour supply and leisure when w = 20.

(b) Calculate the value of labour supply w = 30.

(c) Recall that the response of labour supply to a change in the real wage rate w is

driven by a substitution effect as well as an income effect. In this exercise, which

of these two effects dominates? Provide a brief (worded) explanation.


2. Suppose that the representative consumer in chapter 4 has the following

utility function:

U(C, ℓ) = ln(C) + θ (ℓ^1−α/ 1 − α')

 θ > 0 

Calculate the marginal utility of consumption, the marginal utility of leisure and the

consumer’s MRSℓ,C.


3. Suppose that the representative consumer in chapter 4 has the following

MRSℓ,C:

MRSℓ,C = θ(C/ℓ)

Recall that the consumer’s budget constraint is C = wh − wℓ + Π − T.

Derive the consumer’s consumption function. 


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