1. Rachel has a labor-leisure utility function given by U(L, C) = 4L(C + 24) where...
1. Rachel has a labor-leisure utility function given by U(L, C) = 4L(C + 24) where the marginal utility of consumption is 4L and the marginal utility of leisure is 4C + 96. After taxes, she makes $12 per hour and has 16 hours a day to work or consume leisure.
(a) What is her budget constraint? Graph it. Show on the graph where her optimal bundle would be (Hint: You don’t need to solve anything. Just be general).
(b) What is her reservation wage? At the given wage above, will she enter the labor market? Explain.
(c) What is her optimal bundle of leisure and consumption?
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1. Rachel has a labor-leisure utility function given by U(L, C)
= 4L(C + 24) where...
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