Leo thinks leisure and consuming goods are perfect complements. Goods cost $1 per unit. Leo wants...

 

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Leo thinks leisure and consuming goods are perfect complements. Goods cost $1 per unit. Leo wants to consume 5 units of goods per hour of leisure. Leo can work as much as he wants to at the wage rate of $15 an hour. He has no other source of income. (a) How many hours a day will Leo choose to spend at leisure? (he is endowed with 24 hours). Draw a diagram showing Leo's budget and his choice of goods and leisure. (b) Will Leo work more or less if his wage rate increases? Show this only graphically for this part. (c) Find Leo's Labor Supply curve as a function the wage he receives. Show that the slope of his Labor Supply curve is indeed always negative. Leo thinks leisure and consuming goods are perfect complements. Goods cost $1 per unit. Leo wants to consume 5 units of goods per hour of leisure. Leo can work as much as he wants to at the wage rate of $15 an hour. He has no other source of income. (a) How many hours a day will Leo choose to spend at leisure? (he is endowed with 24 hours). Draw a diagram showing Leo's budget and his choice of goods and leisure. (b) Will Leo work more or less if his wage rate increases? Show this only graphically for this part. (c) Find Leo's Labor Supply curve as a function the wage he receives. Show that the slope of his Labor Supply curve is indeed always negative.

Answer rating: 100% (QA)

Solution a 18 hours a day Working CR 51 C 5R thus uC R min C 5R budget line C15R1524360 R ... View the full answer