2. Utility maximization - Trading off labor and leisure The indifference curves on the following graph show Amy's preferences for leisure and consumption for increasing levels of utility, such that her utility ncreases in both consumption and leisure. Assuming that Amy spends 68 hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all. Initially, she works 45 hours (and thus has 55 hours of leisure) and earns $250 per week. Use the grey point (star symbol) to indicate Amy's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes. CONSUMPTION (Dollars per week) 1000 900 800 700 600 500 400 300 200 100 0 0 10 20 30 40 50 60 70 80 LEISURE (Hours per week) -U3 90 100 110 Initial bundle $200 Unemployment Benefits Equivalent Bundle $100 Unemployment Benefits Equivalent Bundle (?)
2. Utility maximization - Trading off labor and leisure The indifference curves on the following graph show Amy's preferences for leisure and consumption for increasing levels of utility, such that her utility ncreases in both consumption and leisure. Assuming that Amy spends 68 hours each week sleeping, she has a maximum of 100 hours available to her for leisure if she does not work at all. Initially, she works 45 hours (and thus has 55 hours of leisure) and earns $250 per week. Use the grey point (star symbol) to indicate Amy's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes. CONSUMPTION (Dollars per week) 1000 900 800 700 600 500 400 300 200 100 0 0 10 20 30 40 50 60 70 80 LEISURE (Hours per week) -U3 90 100 110 Initial bundle $200 Unemployment Benefits Equivalent Bundle $100 Unemployment Benefits Equivalent Bundle (?)
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 2SQP
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Transcribed Image Text:2. Utility maximization - Trading off labor and leisure
The indifference curves on the following graph show Amy's preferences for leisure and consumption for increasing levels of utility, such that her utility
increases in both consumption and leisure. Assuming that Amy spends 68 hours each week sleeping, she has a maximum of 100 hours available to her
for leisure if she does not work at all. Initially, she works 45 hours (and thus has 55 hours of leisure) and earns $250 per week.
Use the grey point (star symbol) to indicate Amy's initial leisure/consumption bundle. Dashed drop lines will automatically extend to both axes.
CONSUMPTION (Dollars per week)
1000
900
800
700
600
500
400
300
200
100
0
0
+
10
20
30 40 50 60 70
80
LEISURE (Hours per week)
90
U3
100 110
Initial bundle
+
$200 Unemployment Benefits
Equivalent Bundle,
$100 Unemployment Benefits
Equivalent Bundle
?
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