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MGEC51H3 Chapter Notes - Chapter 1-2: Budget Constraint, Indifference Curve, Problem Set

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peachbat812
28 Mar 2015
School
UTSC
Department
Economics for Management Studies
Course
MGEC51H3
Professor
Donald Dewees

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Document Summary

Budget constraints (what they are, how they change, etc. ) will be a fundamental part of the analysis undertaken in this course. As such, this problem set is designed to give you practice with budget constraints given different kinds of information provided to you. Label the x and y axis with all pertinent information: suppose that an individual has 24 hours in a day at her disposal, and can decide to work for as many or as few hours as she pleases. Suppose further that she can work at a job that pays per hour. (a) draw her budget constraint. (b) suppose that she decides to work 8 hours at this wage. Using your graph from part (a), plot an indifference curve on this diagram that is consistent with the decision to work 8 hours each day. (c) now suppose that her wage is increased to per hour.

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Related Questions

Benedict works at a job that pays $5 per hour. He has 12 hours per day to allocate between work and leisure. Besides leisure, he consumes food that costs $1 per unit. Now he is offered a new job that pays $8 per hour; however, the employer of this job can employ Benedict at most 5 hours a day. If Benedict wants to work more than 5 hours a day, he can work 5 hours at the new job and additional hours at his old job at $5 per hour.

a) Graph and carefully label Benedict’s original budget constraint and on the same graph draw his new budget constraint after he is offered the new job.

b) If Benedict was originally working 10 hours per day, how would you predict that the new job offer would change his hours of work? Why?

c) How would your answer to part b) change if Benedict was originally working 3 hours per week?

Leandro has 16 hours per day that he can allocate to work or leisure. His job pays a wage rate of $20. Leandro decides to consume 8 hours of leisure. His indifference curves have the usual shape: they slope downward, they do not cross, and they have the characteristic convex shape. Draw Leandro's time allocation budget line for a typical day, with income on the vertical axis and hours of leisure on the horizontal axis. Leandro's decision to work less as the wage rate falls is the result of a substitution effect and an income effect. In your diagram, show the income effect and the substitution effect from this reduced wage rate. Which effect is stronger?

At my current job we use Archibus/Web Central system to track projects in regards to time worked and money spent towards the overall budget.The contractor specialist uses this system along with a system called also for in house construction projects. In House Construction deals with both budget constraint as well as time. For example: When we submit a construction project to the Government for approval, we have to itemize all costs associated with the total project. We take in account the man-hours needed to fulfill the time constraints; i.e. what trades can properly work within the time constraints while completing the task that are scheduled. Only those skilled tradesmen are tasked to work the job to accurately utilize time for efficiency. They may cost more per hour, but the risk of failure and the time needed is generally lower than what was originally anticipated. We also include the costs of materials as well. These costs include the cost of material(s) itself, mobilization and installation if needed. We use the CMMS system (Web Central) to manage both time and costs at all times. This system can monitor total dollars on a daily basis. What can I add to make this a budget line (budget constraint) scenario?