Asked by Kaitlan Phillips on Jun 07, 2024
Verified
Mr.Cog has 18 hours a day to divide between labor and leisure.If he has 17 dollars of nonlabor income per day and gets a wage rate of 13 dollars per hour when he works, his budget equation, expressing combinations of consumption and leisure that he can afford to have, can be written as
A) R C/13 329.
B) 13R C 17.
C) C 251 13R.
D) 13R C 251.
E) C 302 13R.
Nonlabor Income
Income received that does not originate from employment or work efforts, such as dividends, interest, or rental income.
Wage Rate
The amount of money that is paid to a worker per unit of time or per unit of output, often discussed in the context of labor markets.
Budget Equation
A mathematical representation of the constraint that the total value of goods and services a consumer can purchase is limited by their income.
- Incorporate the concept of financial limitations into personal budget planning.
- Deploy mathematical resources to overcome optimization challenges in economics.
Verified Answer
BP
Barbara PetilloJun 12, 2024
Final Answer :
D
Explanation :
Mr. Cog's total income consists of his nonlabor income plus his income from labor (wage rate times hours worked). Since he has 18 hours a day to divide between labor and leisure, if he works R hours, he has 18-R hours of leisure. His nonlabor income is $17, and his wage rate is $13 per hour. Therefore, his total income (consumption, C) can be expressed as the sum of his nonlabor income and his income from labor, which is $17 + $13R. Since he has 18 hours in total, and if he uses R hours for work, the equation representing his budget constraint is C = 17 + 13R, which matches the format of choice D.
Learning Objectives
- Incorporate the concept of financial limitations into personal budget planning.
- Deploy mathematical resources to overcome optimization challenges in economics.