Consider the optimal choice problem of labor and recreation. Suppose a consumer works the first 8...
Question:
Consider the optimal choice problem of labor and recreation. Suppose a consumer works the first 8 hours of the day at a wage of $10, but received an overtime wage of $20 for additional time worked.
Assume there is zero non-labor income, the price of the consumption good is 1. Since we are looking at how many hours this worker works in one day, it is safe to assume that T=24.
(a) Draw the budget constraint on an optimal choice diagram.
(b) Draw the set of indifference curves that would make it optimal for this individual to work 4 hours of overtime each day.
Optimal Choice
Optimal Choice of the consumer is the point or combination of different goods which gives the consumer best utility overall. This is the choice of combination that consumer is willing to consume to get best utility.
Answer and Explanation:
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View this answer(a) Draw the budget constraint on an optimal choice diagram.
The below shown diagram is of Budget constraint with the curves showing consumer's...
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Budget Constraint Formula, Graph & Examples
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Chapter 1 / Lesson 6
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Learn what budget constraint is and view examples. Understand how to use the budget constraint formula and how to represent a budget constraint using a graph.
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