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3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?

3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter21: The Theory Of Consumer Choice
Section: Chapter Questions
Problem 9PA
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3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?
Transcribed Image Text:3. A consumer has 16 hours to allocate a day (8 hours for sleep). She may use L hours for leisure and 16-L hours for work. The wage per hour is W dollars. (a) The consumer values leisure L and money M. Write down her budget constraint. Hint: The amount of money she can get is less or equal to the total wage, which is determined by the time allocated to work and leisure. (b) Suppose the utility function is U(M, L) = min{M, 10L}. What is the demand for leisure L as a function of wage W? If the wage W increases from 6 to 10, what will be the change in the demand for leisure?
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