Nora's utility function is given by U = ln(C) + ln(L), where U is utility, C is consumption, and L is
leisure. The total time Nora has is T = 1 and is a utility maximizer. Before the Covic pandemic, the
wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the
economy was locked down, Nora's wage rate decreased to 8. However, the government provided
income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has
a total amount of time T = 1 for leisure and work during the pandemic. Which of the following
statements is correct?
a) Before the pandemic, Nora's labor supply is 0.2.
b) Before the pandemic, Nora spent time equal to 0.2 on leisure.
c) Before the pandemic, Nora's consumption was 9.
d) During the pandemic, Nora was better off for having a higher utility level.
e) During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly
offset by the substitution effect from the wage drop.
f) During the pandemic, Nora's labor supply is 0.5.
a) Before the pandemic, Nora's
labor supply is 0.2.
b) Before the pandemic, Nora
spent time equal to 0.2 on
leisure.
c) Before the pandemic, Nora's
consumption was 9.
d) During the pandemic, Nora
was better off for having a
higher utility level.
e) During the pandemic, Nora's
labor supply is unchanged
becauses income effects were
perfectly offset by the
substitution effect from the
wage drop..
MARGINALIZATION (Different learners in Marginalized Group
Noras utility function is given by U lnC + lnL where.pdf
1. Nora's utility function is given by U = ln(C) + ln(L), where U is utility, C is consumption, and L is
leisure. The total time Nora has is T = 1 and is a utility maximizer. Before the Covic pandemic, the
wage rate is 10, and Nora has no non-labor income. When the pandemic hit and part of the
economy was locked down, Nora's wage rate decreased to 8. However, the government provided
income support by sending out a non-labor income of 5 to everyone, including Nora. Nora still has
a total amount of time T = 1 for leisure and work during the pandemic. Which of the following
statements is correct?
a) Before the pandemic, Nora's labor supply is 0.2.
b) Before the pandemic, Nora spent time equal to 0.2 on leisure.
c) Before the pandemic, Nora's consumption was 9.
d) During the pandemic, Nora was better off for having a higher utility level.
e) During the pandemic, Nora's labor supply is unchanged becauses income effects were perfectly
offset by the substitution effect from the wage drop.
f) During the pandemic, Nora's labor supply is 0.5.
a) Before the pandemic, Nora's
labor supply is 0.2.
b) Before the pandemic, Nora
spent time equal to 0.2 on
leisure.
c) Before the pandemic, Nora's
consumption was 9.
d) During the pandemic, Nora
was better off for having a
higher utility level.
e) During the pandemic, Nora's
labor supply is unchanged
becauses income effects were
perfectly offset by the
substitution effect from the
wage drop.
