Question

Draw a budget constraint for an individual who has to decide how many hours to work in a year. Assume that the maximum number of hours of labor in a year are 4000 (2 full time jobs), and that this worker can earn $10 an hour. Draw an initial indifference curve that represents selecting 2500 hours of work a year

Answer 1

Answer:

answer is given below

Explanation:

given data

number of hours of labor = 4000

earn = $10 an hour

to find out

we take here initial indifference curve represents 2500 hours of work a year

solution

as here budget constraint start = 0 money income

so at 4000 hour work money income will be

money income = 4000  × $10

money income = $40,000

so here slope of the budget constraint is -10

that is wage rate and price of the leisure

so  earning of  $2500 hours of work a year  is $2500