Economics
Kavya1994am has the utility function U = C0.5 l and receives non-labour income (net of taxes) equal to (π – T). Assuming that he has only h hours available in the period, answer the following questions.
a. Using the optimality condition and the budget constraint, find expressions for the optimal consumption and leisure bundle (C*, l*).
b. Find and interpret the following derivatives: ∂C*/∂w, /∂C*/∂T, ∂Ns*/∂w, /∂N s*/∂T, where N s is the individual’s labour supply.
c. How would your answer to b. change if Sam’s utility function was U = Cl2 ? Show your work.
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