A: Suppose that your wage is $20 per hour and you have up to 60 hours per week that you
(a) Now, instead of putting leisure hours on the horizontal axis (as we did in Graph 3.1), put labor hours on the horizontal axis (with consumption in dollars still on the vertical). What would your choice set and budget constraint look like now?
(b)Where on your graph would the endowment point be?
(c) What is the interpretation of the slope of the budget constraint you just graphed?
(d) If wages fall to $10 per hour, how does your graph change?
(e) If instead a new caffeine drink allows you to work up to 80 rather than 60 hours per week, how would your graph change?
B: How would you write the choice set over consumption c and labor l as a function of the wage w and leisure endowment L?
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Question Posted: December 23, 2015 06:29:23