Popular in Course
Popular in Economcs
This 1 page Class Notes was uploaded by Jayda Beahan Jr. on Saturday October 3, 2015. The Class Notes belongs to EC 340 at Boston College taught by Staff in Fall. Since its upload, it has received 4 views. For similar materials see /class/218059/ec-340-boston-college in Economcs at Boston College.
Reviews for Labor Economics
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 10/03/15
Woods College of Advancing Studies Boston College EC340 Labor Economics Professor Ware 418 A Theory and Figure for Household Allocation of Time Allocation of Time Households also allocate their Time per Day to production of goods and services at home designated Home Production using capital and labor services supplied by members of the household The household s Time Budget is Reserve Leisure Demand Market Hours Home Production 1 Time 39139 24 ere as before the household reserves a fixed number of hours per day here 8 hours for pure leisure activities but it now allocates the remaining time among a hours used for home production designated H such as rearing children preparing meals or mowing a lawn plus b hours offered to labor market activities designated M at a xed real unit wage of w per hour plus c hours of additional leisure L Home Production is represented by an ordinary production of the form Home HomeKH in which the marginal productivity of capital services K supplied by the household and labor hours allocated to home production H are positive but eventually diminishing Market work is an alternative to home production and therefore a household would allocate time to market work only if the marginal product of leisure time converted to market work MPlIl w is greater than the marginal product of leisure time used in home production MP Here is an illustration of utility maximizing choices for a representative household choosing Goods purchased in markets with noneamed income Nonearn andor Wage Earnings wM or produced at home and Leisure This household incurs Work Costs WC either WC1 or WCZ that are paid from wage earnings Goods H Max U UGoodsL Goods NonearnHomeKH wM WC Time 39139 Reserve8 LHM24 UGoodsL62 UGoodsL44 AGoods AHome AEarn x Max A39I H l x Hours Allocation Z Constraint U Max a m 1 C D E E No Work E L1gt0 H1gt0 M10 No 2 C D E K H wc0 E1 L2gt0 H2gt0 M2H2L2gt0 Yes 3 C D E K G I wclgt0 E L3gt0 H3gt0 M3H3L3gt0 Yes NonearnED q L1gt0 H1gt0 M10 No 4 C D E K P O wc2gt0 L4gt0 H4gt0 M40 No l Wm E E E E E me c 1a Ll No Market Work 16 Leisure 1b Hleeeeeeeeeeeeeeeeo e me 2a L2 No Work Costs 16 Leisure 21 l HZHHHHHHHOHeHome 2c M2H2L2 e e e i o M Market 3a L3 WC1gt0 Reservation Wclquot 16 Leisure 3b l H3 HHHHHHOHeHome 3c M3H3L3e eee eel o MMarket 4a L WC gt0 16 Leisure 4 2 4b 4eeeeeeeeeeeeeeeeo e ome Page 51 Edited 23Mar04 Printed 14Feb07 EC340 Handout d 418