ECON 359 - Winter 2026
TUTORIAL 4
The utility function of the representative consumer is given by
i b
h b−1
b−1 b−1
u(c, l) = c b + l b
,
where c is consumption, l is leisure and b > 1 is a parameter. The consumer faces the
following budget constraint:
c = (h − l)w,
where h is the total time available to the consumer and w is the wage rate.
Tutorial Activity # 10
Use the Lagrange multiplier method to solve the consumer’s problem of maximizing utility subject to the budget constraint.
Tutorial Activity # 11
What restriction on the model parameter(s) will ensure that the labor supply curve is
positively sloping? Briefly explain your answer.
Tutorial Activity # 12
Derive an expression for the elasticity of substitution (η) between consumption and leisure
for an optimizing consumer. Provide a simple economic interpretation for the elasticity.
1
0
