(Solved): Question 1 (20 points) Mia is a registered nurse. She has 18 hours per day to devote to labor or ...

Question 1 (20 points)

Mia is a registered nurse. She has 18 hours per day to devote to labor or leisure, and has $20 nonlabor income per day. She is paid $10 per hour for the first 8 hours of work and $15 per hour for overtime (for hours worked over 8 hours). Mia’s preferences are represented by U(C,R) = CR utility function, where C is the amount of dollars she spends on consumer goods and R be the number of hours of leisure that she chooses.

Question 1 Part a

Assuming she can work as many hours per day as she wishes, draw Mia’s indif- ference curves, budget constraints and solve for her optimal consumption and leisure choices.

Question 1 Part b

Suppose that Mia’s wage rate rises to $11 an hour for the first 8 hours. She is still paid $15 per hour for overtime. Again, find her optimal choice. Decompose the total change in demand due to a price change into a substitution effect, ordinary income effect and endowment income effect and graphically demonstrate each effect.

 

help please!

Question 1 (20 points) Mia is a registered nurse. She has 18 hours per day to devote to labor or leisure, and has \( \$ 20 \) nonlabor income per day. She is paid \( \$ 10 \) per hour for the first 8 hours of work and \( \$ 15 \) per hour for overtime (for hours worked over 8 hours). Mia's preferences are represented by \( U(C, R)=C R \) utility function, where \( C \) is the amount of dollars she spends on consumer goods and \( R \) be the number of hours of leisure that she chooses. Question 1 Part a Assuming she can work as many hours per day as she wishes, draw Mia's indifference curves, budget constraints and solve for her optimal consumption and leisure choices. Question 1 Part b Suppose that Mia's wage rate rises to \( \$ 11 \) an hour for the first 8 hours. She is still paid \( \$ 15 \) per hour for overtime. Again, find her optimal choice. Decompose the total change in demand due to a price change into a substitution effect, ordinary income effect and endowment income effect and graphically demonstrate each effect.