nicholson微观经济理论（答案+PPT+习题库）-ch16.pptVIP

Chapter 16 LABOR MARKETS Allocation of Time Individuals must decide how to allocate the fixed amount of time they have We will initially assume that there are only two uses of an individual’s time engaging in market work at a real wage rate of w leisure (nonwork) Allocation of Time Assume that an individual’s utility depends on consumption (c) and hours of leisure (h) utility = U(c,h) In seeking to maximize utility, the individual is bound by two constraints l + h = 24 c = wl Allocation of Time Combining the two constraints, we get c = w(24 – h) c + wh = 24w An individual has a “full income” of 24w may spend the full income either by working (for real income and consumption) or by not working (enjoying leisure) The opportunity cost of leisure is w Utility Maximization The individual’s problem is to maximize utility subject to the full income constraint Setting up the Lagrangian L = U(c,h) + ?(24w – c – wh) The first-order conditions are ?L/?c = ?U/?c - ? = 0 ?L/?h = ?U/?h - ? = 0 Utility Maximization Dividing the two, we get Income andSubstitution Effects Both a substitution effect and an income effect occur when w changes when w rises, the price of leisure becomes higher and the individual will choose less leisure because leisure is a normal good, an increase in w leads to an increase in leisure The income and substitution effects move in opposite directions Income andSubstitution Effects Income andSubstitution Effects A Mathematical Analysisof Labor Supply We will start by amending the budget constraint to allow for the possibility of nonlabor income c = wl + n Maximization of utility subject to this constraint yields identical results as long as n is unaffected by the labor-leisure choice A Mathematical Analysisof Labor Supply The only effect of introducing nonlabor income is that the budget constraint shifts out (or in) in a parallel fashion We can now write the individual’s labor supply function as l(w,n) hours worked will depend on both the wage and the a