3. Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours that the consumer works, she receives a real wage rate of w₁, and for hours worked more than q, the consumer receives a real wage of w2, where w₂> w₁. Suppose that the consumer pays no taxes and receives no nonwage income. (a) Write the consumer's budget constraint. (b) Draw the consumer's budget constraint and show graphically her optimal choice of consumption and leisure. (c) Show that the consumer would never work exactly q hours.

3. Suppose that a consumer can earn a higher wage rate for working overtime. That is, for the first q hours that the consumer works, she receives a real wage rate of w₁, and for hours worked more than q, the consumer receives a real wage of w2, where w₂> w₁. Suppose that the consumer pays no taxes and receives no nonwage income. (a) Write the consumer's budget constraint. (b) Draw the consumer's budget constraint and show graphically her optimal choice of consumption and leisure. (c) Show that the consumer would never work exactly q hours.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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