Question
Q. Shelly's preferences for consumption and leisure can be expressed as U(C,L) = ( C - 200 ) x ( L - 80 ). This
Q. Shelly's preferences for consumption and leisure can be expressed as U(C,L) = ( C - 200 ) x ( L - 80 ).
This utility function implies that Shelly's marginal utility of leisure is C - 200 and her marginal utility of consumption is L - 80. There are 168 hours in the week available to split between work and leisure. Shelly earns $15 per hour after taxes. She also receives $300 worth of welfare benefits each week regardless of how much she works.
Find Shelly's utility level when she works 30 hours per week (assume the price of consumption good p=$1).
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