Mary utility function over leisure and consumption

Reference no: EM13334532

Mary's utility function over leisure and consumption is U(L,C) = L2
.C. She receives $864 per week in non-labor income and her market wage is $12 per hour. She can work at most 168 hours per week.
a. Draw Mary's budget constraint. Indicate the values of leisure, consumption and hours of work at each kink and intercept, and the slope along every segment of the constraint.
b. Compute Mary's optimal choice of leisure, consumption and hours. What is Mary's reservation wage?
c. Suppose that Mary earns time-and-a-half for all hours worked over 40 hours per week. Draw Mary's budget
constraint. Indicate the values of leisure, consumption and hours of work at each kink and intercept, and
the slope along every segment of the constraint.
d. Suppose that Mary pays no tax on the first $1440 of her labor earnings per week but 30% tax on all labor earnings beyond the first $1440. Draw Mary's budget constraint. Indicate the values of leisure, consumption and hours of work at each kink and intercept, and the slope along every segment of the
constraint.

Reference no: EM13334532

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