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Write down your budget constraint

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Reference no: EM131439051

Suppose that you have the following utility function: U(L,Y) = LY + 2Y, where L is hours of leisure and Y is other goods. The price of Y is 1. For now suppose that wages are your only source of income. There are 24 hours in a day.

  1. Assume that your hourly wage is 1. Write down your budget constraint.
  2. How many hours of labour would you supply when your hourly wage is 1? You can use any method you want.
  3. Now suppose that your hourly wage increases to 2. How many hours of labour would you supply now?
  4. Finally, imagine that you have received an inheritance which always pays you 8 dollars per day. The hourly wage is still 2. How many hours of labour will you supply?

Reference no: EM131439051

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