Exercise 9. Good vs. Bad (Quasilinear Bads)

Your employee does not like to work, and in fact, the more hours of labor, L, the sadder he feels. He works to earn a living and purchase, x₁, a representative good he enjoys consuming. His utility function is u=x₁-L².

a)Plot in a graph the following bundles of goods and bads (x₁,L): (10,1), (17,1), (22,1), (13,2), (20,2), (25,2), (18,3), (25,3), (30,3).

b)Connect the dots for bundles with same utility. How many indifference curves do you find?

c)What is the marginal utility for the consumption good, x₁? What is the marginal utility for hours worked, L? What is the MRS between labor and consumption good?