Question: We'll consider the case from question 2 without taxes or overtime . Suppose Angela's utility function is given by u(c, l) = logc+l Use the

We'll consider the case from question 2without taxes or overtime. Suppose Angela's utility function is given by

u(c, l) = logc+l

Use the budget constraint from question 2.

(a)Find her optimal choices. (Second order conditions are satisfied).

(b)How does Angela's choice oflchange as her wagewchanges? What about her

choice ofc?

Suppose Angela had a fixed income ofmdollars per day (not depending on hours

worked). Also, but spending time with cats cost her money -pdollars per hour.

(c)What would her budget constraint look like? [Hint: This is your standard

budget constraint]

(d)What would be her optimal choices now?

(e)How does Angela's choice oflchange as her wagemchanges? What about her

choice ofc?

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