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Suppose you are the only producer and consumer in the economy and the only constraint you face is time. You produce a apple in an
- Suppose you are the only producer and consumer in the economy and the only constraint you face is time. You produce a apple in an hour, if you do not make a production, you enjoy your time as a leisure time. You derive utility from both consuming the apple and consuming the leisure time. Suppose there are T hours to be used for both leisure and production. Additionally suppose that you are provided with m( > 0 ) apple in each day by the government. ( Consumption does not take time)
- Please draw the budget constraint and budget set you face (5marks)
- Suppose that you become able to produce two apples in an hour but the number of apple provided everyday by government dropped to m-2 ( m > 2). Could you please draw budget set and budget constraint under new settings? (This scenario is valid only for this question) (5 marks)
- Suppose that if you use h(< T) hours of leisure (MULeisure/ MUapple) = 1 and if you use more than hhours for leisure (MULeisure/ MUapple) < 1,and if you use less than hhours for leisure ( MULeisure / MUapple) > 1.Under this new information please discuss whether the optimal leisure ( h* ) is less than h , is equal to hor is greater than h? (5marks). ( h* represents optimal leisure use,MULeisureis the Marginal Utility of Leisure and MUappleis Marginal Utility of Apple).
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