2. Utility maximization - Trading off labor and leisureThe indifference curves on the following graph show Terese's preferences for leisure and consumption for increasinglevels of utility, such that her utility increases in both consumption and leisure. Assuming that Terese spends 68hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all.Initially, she works 20 hours (and thus has 80 hours of leisure) and earns $450 a week. Use the red point (crosssymbol) to indicate Terese's initial leisure/consumption bundle. Dashed drop lines will automatically extend to bothaxes.CONSUMPTION (Dollars per week)30002400180012006000U1U220U340Initial BundleUnemployed 1Ķ--Unemployed 2Aa Aa6080100LEISURE (Hours per week) Help Clear AllNow, suppose that Terese is laid off due to hard economic times, but she is able to collect unemployment benefits of$400 a week. Use the black point (X symbol) to represent Terese's unemployment point on the previous graph whenshe consumes $400 a week and has 100 hours of leisure. Suppose that after a month of Terese's being unemployed, her friend suggests that she apply for a job at hercompany, where she could earn her previous salary again, working 20 hours a week. Because Terese is onutility curve while receiving unemployment benefits than she was when she was employed, sheworking at her friend's company than she is remaining unemployed.would beThe minimum weekly salary that would make Terese as well off working 20 hours a week as she is when unemployedand collecting benefits isNow, suppose that the government enacts reforms that reduce unemployment compensation to $200 per week forTerese. On the previous graph, use the grey point (star symbol) to represent Terese's new unemployment point whenshe consumes $200 a week and has 100 hours of leisure. The minimum weekly salary that would now make Tereseas well off working 20 hours a week as she is when unemployed and collecting benefits islikely to accept a job; therefore, based on this example, youworkers who are currently collectingThe decrease in benefits makes Teresewould expect that a decrease in benefits would causeunemployment benefits to accept job offers.

Consumer labor-leisure choice is a fundamental concept in economics that analyzes how individuals…

The indifference curves on the following graph show Terese's preferences for leisure and consumption for increasing levels of utility, such that her utility increases in both consumption and leisure. Assuming that Terese spends 68 hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all. Initially, she works 20 hours (and thus has 80 hours of leisure) and earns $450 a week. Use the red point (cross symbol) to indicate Terese's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes. CONSUMPTION (Dollars per week) 3000 T 112 T Initial Bundle

The indifference curves on the following graph show Terese's preferences for leisure and consumption for increasing levels of utility, such that her utility increases in both consumption and leisure. Assuming that Terese spends 68 hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all. Initially, she works 20 hours (and thus has 80 hours of leisure) and earns $450 a week. Use the red point (cross symbol) to indicate Terese's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes. CONSUMPTION (Dollars per week) 3000 T 112 T Initial 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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2. Suppose Jill derives utility from not only consuming goods, but also from enjoying leisure time. Let her utility function be defined as follows: U=C.25.R.75 where C is a consumption good that can be bought at a price of $1 and R is hours of leisure (relaxation) consumed per day. There are 24 hours in a day and leisure is defined as time spent not working. Jill has a job that pays $w per hour, a trust fund that pays her $M per day, and she can work any number of hours per day, L, she desires. C, consumption good; R, Leisure (relaxation); L, labor M, non-wage income; w, wage rate. a. Derive her labor supply function? b. Assume M = $100, at what wage is her quantity supplied of hours = 0?
Jerry's utility function is U(x,y) = ( 5x + y ) 18. Find Jerry's MRS (for good X in terms of good Y) and then find the value of the derivative dMRS/dx at the point were x=39 and y=69 and enter it below. Remember to enter the number in decimal form. If the number is negative, then use the negative sign (e.g., -3.29839).
2nd attempt See Hint A consumer faces a tradeoff between labor (L) and leisure (R). She consumes a composite good (C). When the consumer works, she earns an hourly wage of $15.00, and she spends a maximum of 24 hours on labor and leisure, but she chooses to work 10.00 hours. Whatever time she does not spend working, she spends on leisure. She starts with an initial endowment of 11.00 units of the composite good, which she can buy and sell freely at a market price of $4.00. Given this information, what is the consumer's real wage? $ 194
just subparts g and h
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The graph below shows David’s preferences for leisure and consumption. Draw three budget constraints in the graph below. One if David’s wage is $10 per hour (BC1), another if his wage is $20 per hour (BC2) and a third for if his wage is $30 per hour (BC3). Show the optimal combination of leisure and consumption for each of the three budget constraints. Label the optimal amount of Leisure, L1, L2 & L3, and label the optimal amounts of consumption C1, C2 & C3.
Fang likes playing badminton with her friends. Her utility function for playing badminton every week is given by U(t) = 11t – 2t2, where t is measured in hours. They play on a badminton court, which they can rent per hour. Suppose the current price to play on the badminton court is £2.50 per hour. How many hours should Fang play if she wishes to maximise her utility? Explain what we mean by the principle of diminishing marginal utility. Does the principle apply in Fang’s case? Explain why. In a diagram with income in pound sterling on the horizontal axis and quantity on the vertical axis, show the relationship between Fang’s budget and the number of hours that would maximise her consumer surplus.
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