I2

Suppose Aldo makes (8 an hour. His employer offers him a maximum of 40 hours per week He has no non- labour income, and he chooses to work 40 hours a week. s) Graph this equilibrium. What is his marginal rate of substitution? b. ( , s) Suppose Aldo's employer offers him additional work at 612 an hour for every hour worked after 40. Graph (and label) the new budget line. If Aldo chooses to work 45 hours a week, is his utility working 45 hours a week higher, lower, or the same than his utility from working 40 hours a week? Briefly explain