Dtermine the shellys marginal rate of substitution when l

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Shelly's preferences for consumption and leisure can be expressed as:

U(C,L) = ( C - 200 ) × ( L - 80 ).

This utility function implies that Shelly's marginal utility of leisure is C - 200 and her marginal utility of consumption is L - 80. There are 168 hours in the week available to split between work and leisure. Shelly earns $5 per hour after taxes. She also receives $320 worth of welfare benefits each week regardless of how much she works.

(a) Graph Shelly's budget line.

(b) What is Shelly's marginal rate of substitution when L = 100 and she is on her budget line?

Reference no: EM13460454

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