-- , consider Jenny who is working at a large fossil fuel-based power plant in NSW....

 

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-- , consider Jenny who is working at a large fossil fuel-based power plant in NSW. Prior to the energy crisis she had been receiving a wage (w) of $50 per hour. Assume that Jenny's spending on goods and services cannot exceed her earnings per day. Maximum consumption (c) per day is: c = w(24t) where t = hours of free time per day. Your answers must include both a diagram and words to clearly explain your diagram. In addition, your diagram must be fully labelled and therefore you must label both axes, correctly determine the vertical axis and horizontal axis intercepts, label the slope of the budget constraint and show the optimal amount of free time and consumption associated with it. a. Initially when facing w = $50 per hour Jenny chooses to work 8 hours per day and have 16 hours of free time per day. Using a fully labelled diagram describe Jenny's utility maximizing combination of free time and consumption. (4 marks) b. Due to the financial impact of the energy crisis on the energy sector and the implementation of climate change policies, the owners of the fossil fuel-based plants have reduced Jenny's wage to $30 per hour. Using the same diagram as used in part "a" show Jenny's new utility maximizing combination of free time and spending on goods and services assuming that her hours of free time each day decrease to 12 hours. (4 marks) c. On your diagram decompose the overall change in hours of free time in response to the wage decrease into the (i) income effect and (ii) substitution effect. You must use words as well as the diagram to explain the decomposition of the overall change. (7 marks) -- , consider Jenny who is working at a large fossil fuel-based power plant in NSW. Prior to the energy crisis she had been receiving a wage (w) of $50 per hour. Assume that Jenny's spending on goods and services cannot exceed her earnings per day. Maximum consumption (c) per day is: c = w(24t) where t = hours of free time per day. Your answers must include both a diagram and words to clearly explain your diagram. In addition, your diagram must be fully labelled and therefore you must label both axes, correctly determine the vertical axis and horizontal axis intercepts, label the slope of the budget constraint and show the optimal amount of free time and consumption associated with it. a. Initially when facing w = $50 per hour Jenny chooses to work 8 hours per day and have 16 hours of free time per day. Using a fully labelled diagram describe Jenny's utility maximizing combination of free time and consumption. (4 marks) b. Due to the financial impact of the energy crisis on the energy sector and the implementation of climate change policies, the owners of the fossil fuel-based plants have reduced Jenny's wage to $30 per hour. Using the same diagram as used in part "a" show Jenny's new utility maximizing combination of free time and spending on goods and services assuming that her hours of free time each day decrease to 12 hours. (4 marks) c. On your diagram decompose the overall change in hours of free time in response to the wage decrease into the (i) income effect and (ii) substitution effect. You must use words as well as the diagram to explain the decomposition of the overall change. (7 marks)

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a Initially when Jenny is earning 50 per hour and chooses to work 8 hours per day she has 16 hours of free time per day Lets construct a diagram to represent Jennys utilitymaximizing combination of fr... View the full answer