Calculation of MRS and Optimum Combination of Consumption and Leisure

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"Shelly’s preference for consumption and leisure are: U(C, L) = (C-200)*(L-80) This implies that Shelley’s marginal utility of leisure is C-200, and her margin al utility of consumption is L-80. There are 168 hours available in the week. She also receives $320 worth of welfare benefits regardless of how much she works. a) Graph her budget constraint. b) What is her marginal rate of substitution when L = 100 and she is on the budget line? c) What is her reservation wage? d) What is her optimal combination of C and L? "
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May 22, 2013
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