Business economics

Question 1 Ann is trying to work out how many hours she should work. For every hour she works she gets l, she also has some non-labour income of 511 She uses her income to purchase a 'eonsuniption good' which costs 1 per unit. She has 24 hours in total to allooate between leisure and labour. (a) What is the equation of her budget constraint? Draw her budget constraint in a consumption-leisure diagram. What does this represent? {10] {h} Do a new consumption-leisure diagram add her (well-behaved) indifference curves. Explain what they represent and identify the optimal choice. What is true about her marginal rate of substitution (MRS) at the optimal ehoice'iI Explain. [2D] {e} Suppose that her hourly,r wage rate increases to 151 using a diagram and income- substitution effects carefully explain how this changes the number of hours that she works. [2G]