Individual income-leisure constraint

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Consider an individual who was employed prior to having a child. Now, they face daycare costs (M) if they choose to go back to work. Assume that they earn an hourly wage (W) and their non-labour income (YN) is greater than their daycare costs (YN > M). Despite the daycare costs, this individual chooses to work T-L0 hours per week.

Draw a graph that reflects this individual's income-leisure constraint (both with and without daycare costs), utility-maximizing indifference curve (U0) and choice of leisure hours (L0).

Reference no: EM133133613

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