Consider an individual who must drive to his place of work. Assume that there are 16 available hours in the day, that his wage rate is $20 per hour, and that he has nonlabour income of $100 per day. The commute takes one hour each way, and it cost $40 in expenses for the round trip.

Using a work-leisure diagram depict his labour supply choice, including his reservation wage.

Analyze the impact of an increase in commuting cost on his participation and hours decisions.

Analyze the impact, first of an increase in commuting time from two to four hours per day, and second, of an increase in driving expenses from $40 to $60 per round trip, keeping commuting time at two hours.