In: Economics
.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?