Business

Karly Chan

26 December, 17:30

There are 800 consumers in an economy that each have the same utility function given by U (c, l) = 32√ c - (24 - l) 2 where c is their consumption and l is the number of hours they spend for leisure. A single firm serves the market with production function Y = 32L1/2K1/2. The firm cannot choose its capital stock, which is fixed at K = 1600. You can assume the price level is equal to 1 so real and nominal wages are equivalentQuestion: Solve for an individual consumer's labor supply as a function of the real wage and total supply of labor hours for the economy in one day as a function of the real wage (hint: you will need to use the budget constraint to cancel out consumption)