1. Consider an individual facing a wage rate w. There's a total of 100 hours available for work or leisure in a week.
(a) Represent his budget constraint graphically
(b) Represent the effect of an decrease in the wage rate
(c) Represent the effect of an proportional tax on labor income
(d) Suppose that the individual must pay a 100 per week in taxes, regardless of how much he works. How does this affect his budget constraint?
2. Suppose the wage rate is w = 1. An agent is working 6 hours per day and consumes 5 units of goods per day. Suppose that the agent claims to be indifferent between his current situation or working one more hour in exchange for two addi¬tional units of consumption. Is this agent maximizing is utility? Why? Should he be working more hours? or fewer?
3. Drowns indifference curve for consumption and hours of work. (Hint: in class we discussed indifference curves for consumption and hours of leisure, this is different.)