3) Most real estate transactions pay realtors a commission of 6 percent of the sale of a property, of which 2 percentage points is paid to their real estate office. This translates to $25 an hour for the average realtor. Recently, however, a firm called TREX has adopted a system whereby the realtor pays the firm $50 a day upfront for use of the company's name, but the realtor keeps the full 6 percent commission or $37.50 an hour for the average realtor.

a) Consider two budget constraints on the same graph for the average realtor. One constraint is for working for TREX and the other is for the "standard" real estate firm. There are there are 20 hours in the day to work or have leisure and there is no income outside of work. For each of the two systems, If L = 0 C = ??? If C = 0 L = ??? And at what L, C combination do the two budgets cross?

b) There has been much complaining from "standard" real estate firms that TREX has hired all of the "good" realtors. Why is it that realtors who work more than four hours a day for a standard firm would prefer working for TREX?

c) Use the concept of income and substitution effects to explain why realtors work more hours for TREX than for standard firms.