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2-2. Charlie and Larry both face the same budget line for consumption and leisure. At every possible consumption- leisure bundle on the budget line, Charlie always requires marginally more leisure than does Larry in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph several indifference curves and the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result?

2-2. Charlie and Larry both face the same budget line for consumption and leisure. At every possible consumption- leisure bundle on the budget line, Charlie always requires marginally more leisure than does Larry in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph several indifference curves and the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I need help answering question 2.2. Is Larry the one to increase his consumption rather than his leisure in comparison to Charlie. I found that the answer on here might not be precisely right so I need to double check

Working-age Population 234m 238m 251m 2-2. Charlie and Larry both face the same budget line for consumption and leisure. At every possible consumption- leisure bundle on the budget line, Charlie always requires marginally more leisure than does Larry in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph several indifference curves and the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result? 2-3. Tom earns $15 per hour for up to 40 hours of work each week and $30 per hour for every hour in excess of 40. Tom also faces a 20 percent tax rate, pays $4 per hour in child care expenses for each hour he works, and receives $80 in child support payments each week. There are 110 (non-sleeping) hours in the week. Graph Tom's weekly budget line. 2-4. Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U (C, L) = C × L. This functional form implies that Cindy's marginal rate of substitution is C/L. Cindy receives $660 each week from her great-grandmother-regardless of how much Cindy works. What is Cindy's reservation wage? Page 73 2-5. Currently a firm pays 10% of each employee's salary into a retirement account, regardless of whether the employee also contributes to the account. The firm is considering changing this system to a 10% match meaning that the firm will match the employee's contribution into the account up to 10% of each employee's salary. Some people at the firm think this change will lead employees to save more and therefore be more able to afford to retire at a younger age, while others believe this change will lead employees to have less retirement savings and therefore be less able to afford to retire. Explain why either point of view could be correct. 2-6. Shelly's preferences for consumption and leisure can be expressed as 100x
Transcribed Image Text:Working-age Population 234m 238m 251m 2-2. Charlie and Larry both face the same budget line for consumption and leisure. At every possible consumption- leisure bundle on the budget line, Charlie always requires marginally more leisure than does Larry in order to be equally happy when asked to forego a dollar of consumption. Using a standard budget line, graph several indifference curves and the optimal consumption-leisure bundle for both people. Which person optimally chooses more consumption? Which feature of indifference curves guarantees this result? 2-3. Tom earns $15 per hour for up to 40 hours of work each week and $30 per hour for every hour in excess of 40. Tom also faces a 20 percent tax rate, pays $4 per hour in child care expenses for each hour he works, and receives $80 in child support payments each week. There are 110 (non-sleeping) hours in the week. Graph Tom's weekly budget line. 2-4. Cindy gains utility from consumption C and leisure L. The most leisure she can consume in any given week is 110 hours. Her utility function is U (C, L) = C × L. This functional form implies that Cindy's marginal rate of substitution is C/L. Cindy receives $660 each week from her great-grandmother-regardless of how much Cindy works. What is Cindy's reservation wage? Page 73 2-5. Currently a firm pays 10% of each employee's salary into a retirement account, regardless of whether the employee also contributes to the account. The firm is considering changing this system to a 10% match meaning that the firm will match the employee's contribution into the account up to 10% of each employee's salary. Some people at the firm think this change will lead employees to save more and therefore be more able to afford to retire at a younger age, while others believe this change will lead employees to have less retirement savings and therefore be less able to afford to retire. Explain why either point of view could be correct. 2-6. Shelly's preferences for consumption and leisure can be expressed as 100x
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