Assume you can work as many hours      you wish at £12 per hour (net of tax). If you do not work, you have no        income. You have no ability to borrow or lend, so your consumption, c, is       simply equal to your income.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Assume you can work as many hours

     you wish at £12 per hour (net of tax). If you do not work, you have no 

      income. You have no ability to borrow or lend, so your consumption, c, is

      simply equal to your income.

 

Now assume that you receive an income of £140 per week from an unknown benefactor. Show the impact on your feasible set, and show a new optimal choice in which consumption increases but labour supply decreases.  Using the concept of the marginal rate of substitution, explain why this is a likely outcome.

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