Jack?s utility function i

Jack?s utility function i

Jack?s utility function is U(Y,N), where N = leisure and Y = w(24-N) is income.Moreover, leisure for Jack is a normal good A) Illustrate Jack?s optimal work andincome choice; B) How does Jack?s optimal choice relate his marginal rate ofsubstitution to his marginal rate of transformation? C) Suppose that as long asJack makes less than $80,000 a year, he is willing to work harder when he gets apay raise. Show that this implies that his substitution effect is stronger than hisincome effect. D) Suppose that when Jack makes more than $80,000, he takesmore vacation time after he gets a pay raises. Illustrate how this implies thatnow the income effect dominates the substitution effect.

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