Question
Problem 2 (12 points) Alina is a single mother with children with preferences for leisure time and consumption of marketed goods equal to U(L,C) =
Problem 2 (12 points)
Alina is a single mother with children with preferences for leisure time and consumption of marketed goods equal to U(L,C) = L^2/3 C^1/3.
Each day, she has a time endowment of T = 16 hours she can spend working (N) or taking care of the kids at home (L). Her hourly wage
is $10.
a. How many hours does Alina choose to work each day if she has no income from other sources?
b. In a diagram measuring leisure time along the horizontal axis, draw Alina's optimal choice and clearly high-light the number of hours
Alina spends working each day.
Alina's boss wants her to do some over-time, if she agrees he raises her pay to $15 an hour. (on all hours).
c. Explain why even if offered a higher pay, Alina does not agree to work over-time.
d. What would happen to Alina's number of hours worked if her mother decided to help her out financially and gave her some money
each month?
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