3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?
3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Help!
Transcribed Image Text:3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use
L hours for leisure and 16-L hours for work. The wage per hour is W dollars.
(a)
The consumer values leisure L and money M. Write down her
budget constraint. Hint: The amount of money she can get is less or equal to
the total wage, which is determined by the time allocated to work and leisure.
(b)
Suppose the utility function is U(M, L) = min{M, 10L}. What
is the demand for leisure L as a function of wage W? If the wage W increases
from 6 to 10, what will be the change in the demand for leisure?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 1 steps with 1 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education