Open Word and answer the following questions. Save the document and print it when you are done. 1. Use the Lagrangean method to solve this consumer/worker’s constrained optimization problem: Show all...

Open Word and answer the following questions. Save the document and print it when you are done.

1. Use the Lagrangean method to solve this consumer/worker’s constrained optimization problem:

Show all of your work.

2. Do your results for H∗ and G∗ agree with the numerical approach in the text? Is this surprising?

3. Using the Comparative Statics Wizard, the wage elasticity of labor supply using a wage increase from $10/hr to $20/hr is 0.1. Use your reduced-form solution for H∗ to find the wage elasticity of labor supply at w = $10/hr. Show your work.

4. Does your point wage elasticity from the previous question equal 0.1 (the elasticity based on a $10 wage increase)? Why or why not?

5. Whether the labor supply curve is upward sloping or backward bending has nothing to do with the Giffenness of work. If labor supply is positively sloped, G and H are substitutes or complements, but which one? Draw a graph that helps you explain your answer.