LO 2, 4 Suppose a two-person household. Person 1 has h1 units of time available and takes l1 units of leisure time, and person 2 has h2 units of time available and takes l2 units of leisure time. Collectively, the two persons in the household care about their total consumption

c, and their total leisure l = l1

+ l2, and they have preferences over their total consumption and total leisure just as speciied in this chapter. But person1 faces a market wage w1, and person 2 faces a market wage w2, with w1 7 w2.

(a) Draw the budget constraint faced by the twoperson household. What will the household do, that is, how much does each household member work?

(b) What happens if the market wage of person 2 rises?

(c) Explain your results and interpret.