Problem
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 non-labor income.
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 elastic?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.