Consider an individual who must drive to his place of work. Assume that there are 16 available hours in the day, that his wage rate is $20 per hour, and that he has non-labour income of $100 per day. The commute takes one hour each way, and it costs $40 in expenses for the round trip.

a. Using a work-leisure diagram, depict his labour supply choice, including his reservation wage.
b. Analyze the impact of an increase in commuting time from two to four hours per day on his participation and hours decision.
c. Analyze the impact of an increase in driving expenses from $40 to $60 per round trip on his participation and hours decision, keeping commuting time at two hours.

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If the commute time increases from one to two hour then the cost will go to 411 yearly and if th... View the full answer