5. Laurent must decide how to allocate his 24-hour day between non-wage activities, leisure, and wage activities, labor. For every hour of labor that he supplies he is paid by his employer $w. Laurent can purchase bottles of wine (y) at a price of $p per bottle (and wine is the only consumption good). Assume that both goods are normal. 8) Assume that the bundle (__e'*,y*) is Laurent's best bundle on his budget line. Illustrate an indifference curve through Q,y') assuming that leisure and wine are neither perfect complements nor perfect substitutes. Suppose that Laurent receives a raise and his wage rises to w'. b) C) d) B) In your diagram, illustrate his new budget line. In your diagram illustrate a new best bundle for Laurent assuming that the substitution effect was stronger than the income effect for leisure. In a new diagram, illustrate the new budget line and a new best bundle for Laurent assuming that the income effect was stronger than the substitution effect for leisure. Assume that you are told that the (wage) elasticity of his labor supply curve is -.2. Which of your diagrams is consistent with that information? Briey explain why. Finally let's assume that Laurent's preferences over leisure and wine can be represented by the following utility function: mtg) =2 Ml) + My). g) h) Find Laurent's demand functions for leisure and wine. Given your demand function for leisure, what is his supply curve of labor? Illustrate his supply curve. What is the (wage) elasticity of his labor supply curve? Which effect was stronger - the substitution or the income effect