Capital and Labour Used in Production & Factor Demands For Capital and Labour - Economics Assignment Help

Assignment Task -       

Question 1. 

 Consider a consumer who could earn $400 per week and has 50 weeks available each year to allocate between work (H) and nonmarket time (L). They have no non-labour income. Their utility function is U = C2L , where C is the value of consumption goods. What is their optimal choice for the number of weeks in nonmarket time and consumption. Show this in a diagram. 

Suppose the government introduces a policy that (i) offers no benefits to people who do not work, (ii) offers a wage subsidy on earnings at a rate of 25%, with a maximum benefit of $2500, and (iii) the benefit is subject to reduction at a rate of 50% for every dollar earned above $15,000 in the year. Show the person’s new budget constraint in a new diagram, and discuss how the person’s optimal choice might change (you do not have to calculate this, but point to where it is likely on the new budget constraint). Discuss how income and substitution effects play a role. 

Question 2

Design a defined benefit pension plan that encourages employees to retire at exactly age 57 in the absence of mandatory retirement policies. The plan formulas should align with pension plans commonly found in Canada and reward long-term employees. Illustrate the incentives in your plan design with an example employee. You should assume this employee starts planning retirement at age 50, and earns $60,000 per year. State any other assumptions built into your example. Prepare a short report, with diagrams, explaining your plan and its incentives. Submit any other files (eg. Excel file) that shows any underlying calculations involved in your example. 

Question 3 . 

 a) Suppose the production of product Q requires capital K and labour N as inputs, and is characterized by the production function Q=KN. With a wage rate of $20 per unit of labour and rental rate of $50 per unit of capital, what are the equations describing the (long-run) conditional factor demands for capital and labour? 

 b) Suppose the firm decides to produce 25000 units. How much capital and labour used in production?

 c) Show your answer in a well-labelled diagram. Label all axes, intercepts, slope, and the solution from part (b). 

 d) Suppose a subsidy for rent paid to capital is offered to the firm. Show how this would alter the firms choice of labour and capital in a new diagram. (You do not need to calculate anything, but offer a clearly labelled diagram with scale and substitution effects.)

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