Specific Requirements

Please answer the questions below with adequate detail and clarity. Pay attention to the quality of your writing. Good written communication skills are valued in the profession. When doing diagrammatical work, make sure to label the axes, show details such as marking intercept lengths, labelling relevant points and bundles and showing arrows where appropriate.

Assume the followings whilst answering the questions:

1. A household spends income between two goods: "leisure/freetime per day" and "consumption per day". While drawing diagrams, please place "leisure/freetime per day" on the horizontal axis and "consumption per day" on the vertical axis.
2. A household's preferences are represented by usual shaped strictly convex indifference curves.
3. "Leisure/freetime" represents the rest of the day from "working time". For example, if a household spends 8 hours on working per day, then they spend 16 hours on leisure/freetime per
4. day. There are 24 hours in a day.
5. Both goods are homogenous and divisible, so that they can both be consumed in fractional
6. quantities.
7. Price of per unit consumption is 1$ and price of per unit leisure/freetime is determined by wage
8. rate, w$.
9. Keep the numbers up to 4 decimal places, e.g., 12.3456

7. For simplicity, calculate some of the relevant data as follows:

1. Average annual free time = (24 x 365) - (Average annual hours worked per employee)
2. Average wage = (Average annual household disposable income) / (Average annual hours
3. worked per employee)
4. Average freetime per day = (Average annual freetime) / 365
5. Average comsumption per day = (Average annual disposable income) / 365

Data:

Avg annual hours worked per employee

Mexico 2009: 1973.0

Mexico 2019: 2139.0

Avg annual household disposable income

Mexico 2009: 12643.1

Mexico 2019:17384.3

Question 2 [aspen Pitt fill [it-'5} Fill out the following following table. according to the assumptions made in part {2] of Specic Requirements. oomump'd on per day Pi": lhl lpl Assume that average freetlme per day and average consumption per day represents the optimal free-time and consumption of a typical household given the budget constraint, respectively. Illustrate a typical Mexican household's budget line in 2009, show their optimal bundle and draw their indifference curve passing through their optimal bundle. Fart [Cl {lists} How does the average wage of a typical Mexican household change from 2009 to 2019? Determine the affect of this change on their budget line from 2009 to 2019 and show it on the diagram that you draw in part [b]. Show a typical Mexican household's optimal bundle in 2019 and draw their indifference curve passing through their new optimal bundle. Fart [ill {13ml Decompose the overall effect on the change in the optimal bundle into income effect and substitution effect, and show it on your diagram in part to}. Based on observed data and your analysis, can a clear conclusion be drawn about whether a typical Mexican household treats leisureffreetime as a normal or inferior good'il Explain your