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Draw her budget constraint

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Suppose Maria's preferences are represented by U(C,`) = 100ln(C) + 175ln(l) so that her marginal utility of leisure is given by 175/l, and her marginal utility of consumption, 100/C. She has 100 hours to split between leisure and work. If she works, she earn 10 dollars per hour.

(a) Draw her budget constraint.

(b) What's Maria's optimal hours of consumption and leisure C∗,l∗, and her utility level associated with the optimal bundle.

(c) Suppose the government wants to help her with the TANF program. The program gives her a bene?t guarantee of 200 dollars, but it comes with a reduction rate of 30%. Draw her new budget constraint (highlight the critical points).

Reference no: EM131211609

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