Answer to Question #186898 in Economics for subarna

Question

Consider the following​ one-period model. Consumer Utility function over consumption​ (C) and leisure​ (L) ​ U(C,L) = Total​ hours: H​ = 40 Labour​ hours: ​= H​ – L ​Non-labour income:​ π ​Lump-sum tax: T Hourly​ wage: w Firm Production​ function: Y​ = ​zF(​) ​= z Total factor​ productivity: z​ = 2 Government Government spending​ (exogenous): G​ = 20 Suppose that the total factor​ productivity, z, increases to 5. What is the income effect of this wage change on labor ​supply(​)? A. ​-5.51 B. ​+8.51 C. ​-8.51 D. ​+5.51 E. None of the above

Answer 1

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