Ben has preferences over consumption, c, and leisure, l, defined by the following utility function: u = c^0.1 0.9. He is endowed with T units of time that he can divide between working, h, and leisure. When he works, he receives a wage per unit of time of w. He also receives Y dollars each period regardless of whether or not he works. Assume that the price of a unit of consumption is p.
A. What is Ben's total endowment income?
B. What is Ben's price of leisure?
C. Find Ben's demand functions for consumption and leisure.
D. What is Ben's labor supply function?
E. If Ben's wage increases by 5%, by how much does his consumption of leisure change?
Answers: 3
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Ben has preferences over consumption, c, and leisure, l, defined by the following utility function:...
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