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In: Economics

.Suppose that an individual has the following utility function: ?(?, ?) = ? 0.5? 0.5 in...

.Suppose that an individual has the following utility function:

?(?, ?) = ? 0.5? 0.5

in which L is leisure time in hours per day and C is the time for a one-way commuting to work in hours per day. It is also known that leisure time for this individual has opportunity cost of $5 per hour while commuting costs $4 per hour.

If you assume that this individual is a rational person who spends 7 hours for sleep and 7 hours at work daily, and her daily budget is $45, how she will allocate the rest of her day between leisure and commute?

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Rahul Sunny answered 1 year ago
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