Initially assume that the individual has a wage rate of $10 and no other sources of income. In the chart below, there are 16 hours each day to devote to leisure or working (the other 8 hours are spent sleeping).

Leisure hours per day	Value of an additional leisure hour	Working hours	Daily income	Value of $1 additional dollar
			$280	5
			$240	6
			$200	7
0	600 utils	16	$160	9
2	500 utils	14	$140	15
4	400 utils	12	$120	25
6	300 utils	10	$100	35
8	200 utils	8	$80	45
10	100 utils	6	$60	55
12	50 utils	4	$40	65

1. What is the optimal number of working hours? (choose whichever is best from 2, 4, 6, 8, 10 or 12). Explain your reasoning.

2. If she gets $40 per day in inherited income, what is the new optimum? Explain.

3. Suppose her wage goes up to $20 per hour (and she doesn't inherit the $40 per day)? What is the new optimum? Explain why.

4. Explain the income and substitution effect in this context.