Lady Wellesleigh makes silk purses out of sows’ ears. She is the only person in the world who knows how to do so. It takes one sow’s ear and 1 hour of her labor to make a silk purse. She can buy as many sows’ ears as she likes for $1 each. Lady Wellesleigh has no other source of income than her labor. Her utility function is a Cobb-Douglas function U(c, r) = c1/3r2/3, where c is the amount of money per day that she has to spend on consumption goods and r is the amount of leisure that she has. Lady Wellesleigh has 24 hours a day that she can devote either to leisure or to working.
Q. What is the supply function for silk purses?
(Hint: The price of silk purses determines the “wage rate” that Lady W. can earn by making silk purses. This determines the number of hours she will choose to work and hence the supply of silk purses.)