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What is john current reservation wage

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Reference no: EM133064215

Assume that John's utility is given by: U = C*LIf you have taken calculus, you will see that MUCL = L and MU=C.  (If not, just take this as a given.)  John is not working, but currently consumes $1400 a week as part of a universal basic income program.  Assume that he has 24 hours a day and 7 days a week to dedicate to either labor or leisure. 

 

  1. What is John's current reservation wage? Show your work.
  2. How would the amount of the universal basic income program have to change in order to induce John to take a minimum wage job at $7.25/hour?
  3. If John had a different utility function such that more weight was place on leisure, what would happen to his reservation wage? No calculations needed just explain up, down, unchanged and why.

Reference no: EM133064215

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