Describe is labor supply positively sloped/Econometrics
U(Y, l) = Y^1/2 l^1/2, where Y= income, l= leisure hours, w= wage rate, price of Y =$1, NL is non-wage income and T is the maximum number of hours available. Let ‘t’ be the tax rate on the hourly wage rate, so the effective wage rate is w(1-t) = w*. a: Set up the optimisation problem and derive the utility maximising level of ‘l’ and labour supply [ LS = T – l]. You must express Ls in terms of w, t, T and NL. Is labor supply positively sloped?
