Full income budget constraint on an individual

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1. Illustrate the full income budget constraint on an individual who has T0 units of discretionary time, Y0 units of unearned income and a wage rate of W0.

2. In the same diagram, illustrate the utility maximizing choice of leisure and goods/income. Indicate the number of hours that this individual works.

3. Now suppose that some kind of time-saving device (such as improved transit or the introduction of microwave ovens) increases the amount of discretionary time to T1>T0. Illustrate the new budget constraint in your diagram.

4. How does this increase in discretionary time affect the quantity of labour supplied to the market? Explain and illustrate in your diagram.

Reference no: EM13860050

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