Ms. Shanila works as a free-lance worker at a software house. Suppose she keeps awake for 100 hours a week. Also suppose that part of this time she can spend on earning money doing this job and using it for her consumption, and the rest of the time she can spend on her leisure not earning money. At first, she earns Rs.500 for every hour she works. Draw a figure showing Shanila’s budget constraint, her indifference curve for consumption and leisure and her optimum. ii If per hour wage paid to her increases to Rs.600 for doing exactly the same work, draw figures to explain why she would increase her working hours or decrease her working hours.

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Chapter1: Making Economics Decisions
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Ms. Shanila works as a free-lance worker at a software house. Suppose she keeps awake for 100 hours a week. Also suppose that part of this time she can spend on earning money doing this job and using it for her consumption, and the rest of the time she can spend on her leisure not earning money. At first, she earns Rs.500 for every hour she works. Draw a figure showing Shanila’s budget constraint, her indifference curve for consumption and leisure and her optimum. ii If per hour wage paid to her increases to Rs.600 for doing exactly the same work, draw figures to explain why she would increase her working hours or decrease her working hours. iii Mr. Khan is planning for his requirement. Suppose he can consume his salary of Rs. 100,000 while he is in service or save his salary to consume it after retirement. When he saves his salary he will get 10% interest on it. Draw Dr. Khan’s budget constraint, his indifference curve and his optimum. iv If interest rate goes up to 20%, draw figures to show when he will save more and when he will save less.
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