Marty McFly’s utility function is given by U(L, C) = C(L+8).
There are 24 hour in a day. His wage is $10/hr. and he has $20
a. Find the budget constraint and then the optimal number of
hours he should spend in Leisure (L)
b. Is it possible for Marty to consume $100 and have 10 hours of
leisure a day? Explain.
c. If the wage changed to $5/hr would Marty work more or less?
Are Leisure and Consumption gross complements or substitutes?
d. Using the optimal amount of work from parts a and c, what is
the elasticity of Marty’s labor supply? Is Marty’s labor supply