Source of income other than your wage earnings

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Reference no: EM13886873

Suppose there are two commodities, food, c, and work, L. Food is a "good" and work is a "bad".The prevailing prices of c and L are, Pc= $1/unit and w = -$10/hr. (the price of consuming another unit of L is -$10/hr) Suppose you can work no more than 24 hours and have no source of income other than your wage earnings.

a. Draw an indifference map for L and c.

b. Draw the budget constraint for L and c. How much food could they buy if L=0 and L=24.

c. Assuming your preferences for L and c are represented by, u(c,L) = c - L^2/2 , determine the optimal amounts of c and L.

d. Determine the demand functions for L and c as functions of w and Pc.

Reference no: EM13886873

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