Essay About Incorporation Of Time And Time Elasticity

Ech 22306 – Powerpoint Presenaties – Economic of Households
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Powerpoint presenaties ECH 22306Week 1; consumption and timeOutlineThe lecture Consumption and time is theoretical of nature. We start with a simple neoclassical model of goods.Then. the basic structure of the New Home Economics(NHE), which is neo-classical economic theory of the firm applied to the household, is explained. It leads to the incorporation of time in models that have several implicationsThe differences between income and time elasticity are stated.The Linder argument will be explained with implications for goods and time intensive activitiesNeo-classical economicsUtility function: u = U(x1, …, xN)Budget restriction: Σi pixi = yu = utilityU(.) = utility functionx = market goodp = price of market goody = incomeResult: increased utility due to more consumption of goodsTime in the NHEu = U(x1, …, xN-1, tl)Restrictions: Σi pixi = tww+y0;  tl + tw = T tl = leisure timetw = labor timeT = total timew = wage ratey0 = unearned income, x, p as beforeResult: increased utility due to consumption of more goods and/or leisure (empirical question)Basic observation of household economics: Household technology determines utilityu = U(z, zl); z = f(th, x); zl = g(tl, x)Restrictions: Σi pixi = tww+y0;  tl + th + tw = T z = home products; zl = leisure productsf(.) = household production functiong(.) = leisure production functionth = household production timetl ,tw ,T, w, y0,x , p as beforeUtility increases due to consumption of more goods and/or leisure, and efficiency of time use.New Home EconomicsNew Home Economics (NHE); Garry Becker, professor of economics and sociology in Chicago, powerful theoryHousehold is a small firm, acts perfectly rational, task specialization according to comparative advantagePaid work (Hw), household work (Hh), leisure (Hl)Pw = wage rate = price of one hour of paid work = price of one hour of household work = price of one hour of leisure = opportunity cost = foregone earningsProduction substitution effect (pse) and consumption substitution effect (cse) of a change in PwPse: work/leisure trade-offCse: income/leisure trade-offIn pse, total hours of work remain constant. So as Pw↑ → Hw ↑ and Hh↓In cse, total satisfaction remains constant, so as Pw↑ → Hw ↑ and Hl↓Ie = income effectTe = pse + cse + ie; pse and cse < 0 and ie > 0, so te is empirically establishedIncome elasticity of a good:Percentage change in expenditures on the good per percentage change in incomeInferior good:         e<0           (e.g., potatoes)Luxury good:         e>1           (e.g., durable goods)Necessary good:         0Income elasticity of total consumption = 1 (with constant savings ratio)Income elasticity of time used in an activity (a)Inferior activity:        a<0 (e.g., reading)Normal activity:        a>0 (e.g., photography)Income elasticity of total activity = 0 (because available time is constant)One may possibly buy more of everything but one cannot do more of everything:Average e > average aLinder: The Harried Leisure ClassLinder argues that leisure time has increased till 1970s/1980s in the USASince goods have become cheaper than leisure time, leisure has become more goods-intensive.Leisure time has increased substantially over time.However, amount of money available per hour has increased even more: goods have become cheaper in relation to leisure time.This has led to a change from time-intensive to goods-intensive use of leisure time.Hence, time spent per item has reduced on average.In general, leisure time has become less relaxed more harriedSince the efficiency of some activities can be increased by using more goods, one obtains more utility from such activities. Such activities become popular with increasing income. Remind that less time is spent on each item. (Acceleration of consumption.)Three ways to increase productivity of time use within the Linder frameworkBuying more expensive models of a good;Simultaneous consumption; Successive consumption.Equilibrium: equal marginal utility of spending time on each activity.Conclusion & discussionAvailability of time and increasing income has induced goods-intensive consumption of leisure time;This has several implications for time use during the family life-cycle (where income and time varies across periods).Week 1: time use OutlineContentsThis lecture starts with a brief overview of the contribution of some economists to the debate of modernization.Modernization of a society is not only reflected in consumption but also in changes in time use or the allocation of time. Several issues and trends with respect to the use of time by persons/households in a society labelled postmodern as the Netherlands are discussed. Especially the allocation of time between paid work and household work and time management are discussed.After a socio-economic exploration of factors affecting time used for household production, attention will be paid to the contribution of the New Home Economics in this respect. This model provides several useful insights regarding factors that have influenced the decline in women’s household work during the 20th century and the changes in the overall economic value of household work.Differences and trends in time use across socio-economic strata are discussedFactors as decline in family size, increased labour force participation of married women, monetarisation of household production, better education of women and the rise in the opportunity costs of women’s time are discussed, as well as topics like parental time spent with children and the shared and solitary character of household work timeModernization and time allocationSome topical modern and post modern key-words (buzz words): technological change, demand management, rise of the transnational corporation, planning and control, managerial class (bureaucrats) vs. entrepreneurs, welfare state, the fate of the middle class, deindustrialization, McJob, Mcdonaldization of society, women’s emancipation, ICT, genomics, experience economy, sustainability, globalization, Empire, fast food nation, quality, food safety, transparency, and the likeDemocratization in political, economic, social and cultural field at least in the developed part of the WorldFirst and second demographic transitionIncrease in life expectancy/good health and increase in level of education → rise in human capital, most important capital in societyTime allocation