Mary is a lawyer and is awake for 100 hours per week. She spends some of this time enjoying leisure (jogging, watching TV, hanging with friends, etc.) and spends the rest of her time doing legal work. For every hour she works, she earns $50, which she spends on consumption goods(food, clothing, rent, etc.). Her wage ($50) reflects the trade-off Mary faces between leisure and consumption.

a) In the following diagram, illustrate Mary's budget constraint. What is the maximum amount consumption she can purchase if she has noleisure time? What is the maximum amount of leisure she can engage in if she does not work and, thus, does not purchase any consumption goods?

b) What level of leisure and consumption maximizes Mary' utility if her preferences are given by the indifference curves shown in the graph? Explain.

c) Suppose Mary can earn $100 per hour. Show how the budget constraint changes. What is the new level of leisure and consumption that maximizes Mary utility? Explain.

Consumption 10,000 8,000 6,000 4,000 H 2,000 I1 0 10 20 30 40 50 60 70 80 90 100 Hours of Leisure