y 1. Draw a large (half a sheet of lined paper) budget constraint (feasible set) with income on the y-axis and free time per day on the x-axis. Label the x and intercepts. Draw the optimal point on your budget constraint at 10 hours of work with an indifference curve passing through it.

y 1. Draw a large (half a sheet of lined paper) budget constraint (feasible set) with income on the y-axis and free time per day on the x-axis. Label the x and intercepts. Draw the optimal point on your budget constraint at 10 hours of work with an indifference curve passing through it.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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Concept explainers

Revealed Preferences and Budget Constraint Analysis

Revealed means “Let Out,” and Preference means “Choice”; Choice Reveals Preference.

Question

I know this is technically more than one problem, but it would be weird to send multiple questions since you would need to answer the ones before it to make the whole picture. If possible, just take away 7 questions.

You are offered a job in which you can choose any hours you want. You will be
paid 13 dollars per hour.
1. Draw a large (half a sheet of lined paper) budget constraint (feasible set) with
income on the y-axis and free time per day on the x-axis. Label the x and y
intercepts. Draw the optimal point on your budget constraint at 10 hours of work
with an indifference curve passing through it.
2. Draw the effect of a wage increase from 13 to 18 dollars per hour. Label the
new y intercept.
3. Draw the effect of social security payment of $30 per day with a wage of $13
per hour.
4. What is the equation of your budget constraint in question 3?
5. If your wage doubles from 12 to 24 dollars per hour, what can we can conclude
about
your opportunity cost of free time?
6. How does the substitution effect change your choice of free time and why?
7. How does the income effect change your choice of free time and why?

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