ECON 302 Midterm: ECON302 Midterm 22 Spring 2009 solution

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31 Jan 2019
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Instructions: this is closed book, closed notes exam, no calculators of any kind are allowed, show all the calculations, if you need more space, use the back of the page, fully label all graphs. Consider the classical model studied in class, and briefly described as follows. The consumer derives utility from consumption c and leisure l according to. He is endowed with h hours which he can lcu ln) ln. The real wage is w. the consumer owns a allocate between leisure and work firm and receives dividend income (profit) . Ak technology capital owned by the firm, and dl is labor employed by the firm. The government taxes labor income at the rate of wt. , where a is productivity parameter (tfp), k is the and dividend income at the rate of t: (5 points). Illustrate graphically the impact on the labor demand curve of an increase in real wage, and provide economic intuition for it. w.