Using the budget constraint, PC=WT-l, where C is consumption and l is leisure and T is...

Using the budget constraint, PC=WT-l, where C is consumption and l is leisure and T is total time, show that a cultural constraint or government requirement to work 8 hours per day will tend to make total satisfaction in society lower than it could be if there is no restriction on the number of hours a worker chooses to work.

Solutions

Expert Solution

SOLUTION:-

T = working hour + leisure (L)

Working hour = T - L

Budget constraint C = w(T - L) ; where w = wage rate

* Total satisfaction after fixing the working hour at 8 hours will reduce if the willingness to work of the workers were free to choose their working hours at the given wage rate.

* They definitely optimise their utility by choosing less work and more leisure as this have no effect on their wage before regulations.

* In the figure, the vertical straight line represents 8 hours of work and L2T is the hours of leisure consumed.

* Intitially, IC1 represents the utility level of the workers.

* However, government fixed 8 hours of work, the working hours of the workers has incraesed and leisure time has been reduced.

* Therefore, the consumer with the given budget constraint is now on the lower IC, IC2.

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Rahul Sunny answered 1 year ago

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