leisure - 901 Notes Department of Economics Clemson...

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901 Notes Department of Economics Clemson University 1 Question: Consider an individual with a utility function for consumption and leisure that is described as: U C l = where C is consumption and l is leisure. Assume that the individual has $25,000 in non-labor income and receives a wage rate of $50 per hour. Let the total time available to this person be 4992 hours per year to allocate between work and leisure. (4992 is 16 hours per day, 6 days per week, 52 weeks per year.) However, the individual is not perfectly free to choose a work schedule. The individual must work a minimum of 2250 hours per year to keep the job which pays $50. a. How much does the person work and consume now? Is the constraint binding? b. How much would the person work and consume at a wage of $100? c. Calculate how much, if anything, this person would pay (on an annual basis) to be promoted to a job that pays $100 per hour. Answer:
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leisure - 901 Notes Department of Economics Clemson...

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