Question: 5 . Phoebes utility function is given by U ( L , C ) = C ( L + 8 ) . There are 1
Phoebes utility function is given by UL C CL There are hour in a day. Her wage as a server is $hr and she gets $ nonlabor income from playing her guitar. point eacha Find the budget constraint and then the optimal number of hours she should spend in Leisure L b Is it possible for Phoebe to consume $ and have hours of leisure? Explain. c If the wage changed to $hr would Phoebe work more or less? Are Leisure and Consumption gross complements or substitutes? d Using the optimal amount of work from parts a and c what is the elasticity of Phoebes labor supply? Is her labor supply elastic?
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