Fred Has Just Arrived at College and Is Trying to Figure

question 42

Essay

Fred has just arrived at college and is trying to figure out hoe to supplement the meager $50 a week checks that he gets from home. The amount of leisure time that has left after allowing for necessary activities like sleeping, and studying economics class is 50 hours a week. He can work as many hours per week at a nearby Taco Bell for
$5 an hour. Fred's utility function for leisure and money to spend on consumption is U(C,L)=CL.
a)Write down Fred's budget constraint for leisure and consumption. Draw the corresponding budget line on a diagram with leisure on the X- axis.
b)Sketch Fred's indifference curves.
c)Find the optimal bundle. That is: find the bundle of leisure and consumption that maximizes Fred's utility.
d)Find the optimal labor supply. That is the number of hour Fred chooses to work in Taco Bell.

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Definitions:

Estimated Useful Life

Estimated useful life is the expected time period during which an asset is useful to the owner for its intended purpose.

Revaluation Surplus

An increase in the value of an asset that is reflected on the company's balance sheet when the asset is revalued to its current market value, leading to an appreciation in the asset's worth that is not realized through sales.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the IASB that aims at making global financial statements more comparable.

Statement of Financial Position

Another term for the balance sheet, detailing a company's assets, liabilities, and equity at a specific point in time.