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Budget Constraint Homework Problem

 
 
Reply Thu 29 Sep, 2016 09:05 pm
Hi all, I am have trouble comprehending this homework problem.

I have already drawn 1a, i just need help with understanding 1b, and 1c

1. In a filed of labor economics interest is paid to an individuals decision regarding the balance of labor and leisure at different levels of income. In two-good space, this is typically demonstrated with income (I) on the Y-axis and hours of leisure (L) on the x-axis. Assuming a 24 hour day and that we are interested in per day income, answer the following questions:

a) Using a carefully drawn and labeled graph, show the three different "budget" constraints implied by the following hourly wages: $5/hr, $10/hr, and $15/hr, and label them I1, I2, and I3, respectively.

b) what is the economic interpretation of the slope of the "budget" constraint?

c) Give an interpretation of movements to the right (away from the origin) and to the left (towards the origin) on the L (x) axis (hint: can we use this axis to say any thing about hours of labor supplied?).
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PUNKEY
 
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Reply Fri 30 Sep, 2016 11:01 am
If I had been in your classroom and had the textbook, then I'd probably be able to help you.

Why can't you figure this out, since you were in class and have access to the instructor and the textbook?
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