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Question: Marty McFly's utility function is given by U(L, C) = C(L+8). There are 24 hour in a day. His wage is $10/hr. and he has $20 non-labor income.

a. Find the budget constraint and then the optimal number of hours he should spend in Leisure (L)

b. Is it possible for Marty to consume $100 and have 10 hours of leisure a day? Explain.

c. If the wage changed to $5/hr would Marty 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 Marty's labor supply? Is Marty's labor supply elastic?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92599032

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