3.1 In this chapter, we graphed budget constraints illustrating the trade-off between consumption and leisure.

A. Suppose that your wage is €20 per hour and you have up to 60 hours per week that you could work.

a. Now, instead of putting leisure hours on the horizontal axis as we did in Graph 3.1, put labour hours on the horizontal axis with consumption in euros still on the vertical. What would your choice set and budget constraint look like now?

b. Where on your graph would the endowment point be?

c. What is the interpretation of the slope of the budget constraint you just graphed?

d. If wages fall to €10 per hour, how does your graph change?

e. If you need less sleep and can work up to 80 rather than 60 hours per week, how would your graph change?

B. How would you write the choice set over consumption c and labour l as a function of the wage w and leisure endowment L?