a. Draw the daily budget constraint of a consumer who has 24 hours in their day, and can earn a wage of $20 an hour for every hour chosen to work (and not consumed as leisure). They can spend their income on a composite good c that costs $8 per unit. This consumer also receives $100 from their supportive parents every day. b. If this consumer's utility function for leisure (r) and c is given by U (r, c) = rc, calculate this consumer's optimal bundle.

a. Draw the daily budget constraint of a consumer who has 24 hours in their day, and can earn a wage of $20 an hour for every hour chosen to work (and not consumed as leisure). They can spend their income on a composite good c that costs $8 per unit. This consumer also receives $100 from their supportive parents every day. b. If this consumer's utility function for leisure (r) and c is given by U (r, c) = rc, calculate this consumer's optimal bundle.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.

Question

2.
a. Draw the daily budget constraint of a consumer who has 24 hours in their day,
and can earn a wage of $20 an hour for every hour chosen to work (and not
consumed as leisure). They can spend their income on a composite good c that
costs $8 per unit. This consumer also receives $100 from their supportive
parents every day.
b. If this consumer's utility function for leisure (r) and c is given by U (r, c) = rc,
calculate this consumer's optimal bundle.

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