Find shellys optimal amount of consumption and leisure

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Reference no: EM13207307

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

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

(d) Find Shelly's optimal amount of consumption and leisure.

Reference no: EM13207307

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