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A consumer faces a tradeoff between labor (L) and leisure (R). She consumes a composite good (C). When the consumer works, she earns an hourly wage of $14.00, and she spends a maximum of 24 hours on labor and leisure, but she chooses to work 10.00 hours. Whatever time she does not spend working, she spends on leisure. She starts with an initial endowment of 21.00 units of the composite good, which she can buy and sell freely at a market price of $12.00.

Required:
What is the consumer's real wage?

Respuesta :

batolisis

Answer:

$11.70

Explanation:

composite goods consumed ( C )

She earns an hourly wage of $14

spends maximum of 24 hours  on labor and leisure

works = 10 hours

leisure = 14 hours

initial endownment = 21.00 units

price of composite = $12

Determine the consumer's real wage

Real wage per hour = wage per hour / price of composite

                                = 14 / 12 = $1.17

Hence Total real earnings = Total wage earned  / price of composite

Total wage earned = 14 * 10 = $140

Total real earnings = 140 / 12 = $11.7

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