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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