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Reservation Wage: Suppose Tom has a job selling used cars, but is a terrible salesperson. For the first 30 hours, he works on the sales

Reservation Wage: Suppose Tom has a job selling used cars, but is a terrible salesperson. For the first 30 hours, he works on the sales floor, but never sells anything. So, for his time on the sales floor, he does not receive commissions or any other pay. After he works 30 hours on the sales floor the dealership will allow him to work in the accounting department for $20 an hour. He also rents out a room in his apartment and earns $50 a week from the rent. Please draw a well-labeled diagram that includes the following:

  • A budget constraint reflecting the situation above. You can assume the time endowment is 100 hours for a week.
  • An indifference curve that reflects $20 being the reservation wage between working and not working.

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