Re: ISI INTERVIEW PREP

Posted by deepak on Jun 30, 2012; 11:50am
URL: http://discussion-forum.276.s1.nabble.com/ISI-INTERVIEW-PREP-tp7578819p7578863.html

Yes I did get a/(a+b) for labor supplied. I don't know 'why' in the economic sense :/ . Mathematically, I think it could perhaps be because the nature of the 'budget constraint' is such that, irrespective of the wage, the Leisure intercept is a constant, and hence, the tangency between the utility indifference curves and the budget lines always occurs at the same value of labor supply (or leisure preference) but consumption is shifted up or down depending on the value of wage. Perhaps because the S.E and I.E are equal and cancel each other out?