中级微观经济学讲义15－要素市场.pdf

Lecture 15 FACTORS MARKETS By WALTER NICHOLSON Slides prepared by Linda Ghent (Eastern Illinois University) Modified by Huihua NIE (Renmin Unversity of China) www.ChinaES. 1 Content • Product markets • Labor markets • Capital markets www.ChinaES. 2 Individuals Utility Maximization • The individual’s problem is to maximize utility of consumption (c) and hours of leisure (h) subject to time and income constraints • MaxU(c,h), s.t. l + h = 24, c = wl • Setting up the Lagrangian L = U(c,h) + (24w – c – wh) www.ChinaES. 3 Cont’d • By FOCs, we get  /  dc U h  w MRS (h for c )   dh U / c • To maximize utility, the individual should choose to work that number of hours for which the MRS (of h for c) is equal to w – U/h=1 www.ChinaES. 4 Income and Substitution Effects • How does leisure change if w changes – substitution effects: when w rises, the price of leisure becomes higher and the individual will choose less leisure, h/w0 – Income effects: increasing w leads to an increase in leisure, h/w0 • Two effects move in opposite directions • Work likes inferior goods towards to leisure www.ChinaES. 5 Income and Consumption Substitution Effects