What is the total labour supply in the region mary and jack

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Reference no: EM133300711

Problem Statement: This problem set tells the story of three friends Mary, Jack, who are consumers, and Jess, who owns a firm. Mary, and Jack have preferences over two goods, Dumplings and Free time. Each of them have Ti available hours each day with i = A; B. Jess's firm produces dumplings using two inputs, Labour and Kapital with respective prices w and r: Denote the market price of dumplings as p:

Question: Assuming p = 3 and that w can take any value, what is the total labour supply in the region Mary and Jack live? What is Jess's labour demand? Use the two to find the expression determining the equilibrium wage in the local labour market (do not solve this expression as it would be too complicated). Use all the above and your economic reasoning to, without doing any further calculation, discuss how an increase in the price of capital r will affect the welfare of these three friends.

Reference no: EM133300711

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